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Network Inc manufactures networking devices for personal computer systems, using just-in-time methods. After receiving an order for 300 devices, the company bought materials (for cash) costing $14,000 to fill this order. It incurred labor and overhead costs of $48,000, of which $10,000 was for wages and the rest overhead.
After the production was finished, but before all goods were sold, the company needed to compute an inventory cost for financial statement purposes. The cost of finished goods inventory was $2,480.
Requirements:
Use T-accounts to show the flow of costs under traditional costing system
Prepare journal entries for these transactions using backflush costing.
Use T-accounts to show the flow of costs using a JIT system with backflush costing.
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A measure of the effectiveness with which management utilizes a company's resources, regardless of how those resources are financed.
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