Reference no: EM132460980

Question - Digital Controls makes electronic thermostats for homes and offices. The Augusta division makes one product, Autotherm, which has a standard cost of $35, consisting of $18 of materials and $17 of conversion costs. In January, actual purchases of materials totaled $84,000, labor payroll costs were $15,000, and manufacturing overhead was $41,000. Completed output was 4,000 units. The Augusta division uses a backflush-costing system that records costs in materials inventory and conversion costs accounts and applies costs to products at the time production is completed. There were no finished-goods inventories on January 1 and 80 units on January 31.

Requirements -

1. Prepare journal entries (without explanations) to record January's costs for the Augusta division. Include the purchase of materials, incurrence of labor and manufacturing overhead costs, application of product costs, and recognition of cost of goods sold.

2. Suppose the journal entry to recognize overapplied or underapplied conversion costs at the end of January.