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    Manufacturing Systems: Traditional

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    jell
    Here are the journal entries for the RIP account and finished goods inventory for the Clifton Manufacturing Company for May: 1) Raw and In-Process 865,000 Accounts Payable 865,000 To record raw materials received on credit 2) Raw and In-Process 1,350 Cost of Goods Sold 1,400 Finished Goods 2,750 To allocate conversion costs to ending inventories 3) Cost of Goods Sold 865,600 Finished Goods 2,750 Raw and In-Process 862,850 To backflush raw material costs from RIP to finished goods

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    Manufacturing Systems: Traditional

    Uploaded by

    jell
    41 views15 pages
    Here are the journal entries for the RIP account and finished goods inventory for the Clifton Manufacturing Company for May: 1) Raw and In-Process 865,000 Accounts Payable 865,000 To record raw materials received on credit 2) Raw and In-Process 1,350 Cost of Goods Sold 1,400 Finished Goods 2,750 To allocate conversion costs to ending inventories 3) Cost of Goods Sold 865,600 Finished Goods 2,750 Raw and In-Process 862,850 To backflush raw material costs from RIP to finished goods

    Original Title

    JIT Backflush

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    Here are the journal entries for the RIP account and finished goods inventory for the Clifton Manufacturing Company for May: 1) Raw and In-Process 865,000 Accounts Payable 865,000 To record raw materials received on credit 2) Raw and In-Process 1,350 Cost of Goods Sold 1,400 Finished Goods 2,750 To allocate conversion costs to ending inventories 3) Cost of Goods Sold 865,600 Finished Goods 2,750 Raw and In-Process 862,850 To backflush raw material costs from RIP to finished goods

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    41 views15 pages

    Manufacturing Systems: Traditional

    Uploaded by

    jell
    Here are the journal entries for the RIP account and finished goods inventory for the Clifton Manufacturing Company for May: 1) Raw and In-Process 865,000 Accounts Payable 865,000 To record raw materials received on credit 2) Raw and In-Process 1,350 Cost of Goods Sold 1,400 Finished Goods 2,750 To allocate conversion costs to ending inventories 3) Cost of Goods Sold 865,600 Finished Goods 2,750 Raw and In-Process 862,850 To backflush raw material costs from RIP to finished goods

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    Download as ppt, pdf, or txt
    of 15

    Manufacturing Systems

     Traditional
     “Just-in-Case.”
     Inventories of raw materials are maintained just in case
    some items are of poor quality or key suppliers don’t
    delivery on time.
     Push approach manufacturing.
     Materials are pushed through the manufacturing process.
     Based on standard costs. Once a standard is reached
    improvement ceases.
    Manufacturing Systems
     Progressive
     “Just in Time.”
     Raw materials arrive just in time for use in production.
     Finishedgoods are manufactured just in time to meet
    customer needs.
     Pull approach manufacturing.
     Raw materials are not put into the process until the next
    department requests them.
     Continuous quality improvement.
    Objectives of JIT

     Reduction or elimination of inventories


     Enhanced production quality
     Reduction or elimination of rework costs
     Production cost savings from improved flow of
    goods through the process.
    Three important elements must
    exist for JIT systems to work:
     Dependable suppliers who can delivery on short notice.
     Multiskilled workforce who can work in work cells or work
    stations.
     One worker may operate several kinds of machines.
     Total quality management. Objective is no defects.
    Use backflush costing.
    Backflush Costing

    Backflush costing describes a costing


    system that delays recording some or
    all of the journal entries relating to the
    cycle from purchase of direct materials
    to the sale of finished goods.
    Backflush Costing

    Where journal entries for one or more stages


    in the cycle are omitted, the journal entries
    for a subsequent stage use normal or standard
    costs to work backward to flush out the costs in
    the cycle for which journal entries were not made.
    Describe different ways
    backflush costing can simplify
    traditional job-costing systems.
    Journal Entries….
    Raw and In-Process XX
    Accounts Payable XX
    To record direct material purchased during the period
    Conversion Costs Control/COGS XX
    Various accounts XX
    To record the incurrence of conversion costs

    Finished Goods Inventory XX


    Raw and In-Process XX
    Conversion Costs/COGS XX
    To backflush conversion cost to finished goods and RIP assuming
    ending inventory is higher than beginning inventory.
    Journal Entries….

    Finished Goods Inventory XX


    Conversion Costs/COGS XX
    Raw and In-Process XX
    To backflush raw material cost to finished goods and COGS
    assuming ending inventory is higher than beginning inventory.
    To illustrate backflush costing… using the
    information in Problem 4
    Raw and In-Process 230,000
    Accounts Payable 230,000
    To record direct material purchased during the period
    Cost of Goods Sold 405,000
    Payroll 180,000
    Factory Overhead Control 225,000
    To record the incurrence of conversion costs
    Finished Goods Inventory 4,300
    Raw and In-Process 3,700
    Cost of Goods Sold 8,000
    To backflush conversion cost to finished goods and RIP assuming
    ending inventory is higher than beginning inventory.
    Journal Entries….

    Cost of Goods Sold 264,700


    Raw and In-Process 245,200
    Finished Goods Inventory 19,500
    To backflush raw material cost to finished goods and COGS
    assuming ending inventory is higher than beginning inventory.
      Materials   Materials

      Raw and In Process   Finished Goods

    Beginning 28,000.00 26,200.00

    Add Purchases/Materials Backflushed from RIP 230,000.00 245,200.00

    TMAU 258,000.00   271,400.00

    Ending 12,800.00 6,700.00

    Materials Backflushed to Finished Goods/COGS 245,200.00 264,700.00

    Decrease in Material 19,500.00

      Conversion Cost   Conversion Cost

      Raw and In Process   Finished Goods

    Ending 15,700.00 13,100.00

    Beginning 12,000.00 8,800.00

    Increase(Debit)/(Decrease)(Credit) 3,700.00   4,300.00


    The Clifton Manufacturing Company has a cycle time of 1.5 days, uses a Raw
    and In Process (RIP) account, and charges all conversion costs to Cost of
    Goods Sold at a ratio of 2:1 for labor and overhead respectively. At the end of
    each month, all inventories are counted, their conversion cost components are
    estimated, and inventory account balances are adjusted. Raw material cost is
    back-flushed from RIP to Finished Goods. The following information is for May:
     

    Beginning balance of RIP account, including P2,000 of labor cost – P27,500


    Beginning balance of finished goods account, including P3,500 of overhead
    cost – P30,000
    Raw materials received on credit – P865,000
    Ending RIP inventory per physical count, including P1,450 overhead cost
    estimate – P31,000
    Ending finished goods inventory per physical count, including P7,750
    conversion cost estimate – P24,500
     

    Required: Prepare all the journal entries that involve the RIP account and/or the
    Solution
    Raw and In-Process 865,000
    Accounts Payable 865,000
     
    Raw and In-Process 1,350
    Cost Of Goods Sold 1,400
    Finished Goods 2,750

    Cost Of Goods Sold 865,600


    Finished Goods 2,750
    Raw and In-Process 862,850

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