Republic of the Philippines

BATANGAS STATE UNIVERSITY

MODULE IN MANAGEMENT ACCOUNTING

________________________________________________________________________________________________________
CHAPTER 2 :
Concepts and Classification
TRUE OR FALSE\

For each of the following statements, enter a T or and F In the blank to indicate whether the
statement is true or false.

___ 1. One purpose of a JIT inventory system is to have goods ready just when the customer
needs them.

___ 2. Under JIT, materials are "pushed" from one workstation to another to ensure timely
completion of finished products.

___3. A company' will typically have fewer suppliers under JIT than a conventional system.

___ 4. For JIT to operate successfully, all similar pieces of equipment (such as lathers or drill
presses) must be grouped together.

___5. One way to reduce inventories is too reduce the setup time needed between
production runs.

___6. The most effective way to achieve total quality control is to have an Inspection
Department that inspects all incoming raw materials, and inspects goods as they move
along the product flow line.

___ 7. In a JIT environment, workers are expected to be cross-trained and work as a team.

___8. Under JIT, process time and queue time would both be considered value-added
activities.

___9. The time involved in changing equipment and getting jigs and forms in place to
accommodate the production of a different item is known as the setup time.

___10. The workforce under JTT has Iess responsibility for quality control than in a
conventional production system.

Chapter 6 Just in Time and Backflushing

Problem1

Stillwater Manufacturing has a cycle time of less than a day, uses a Raw and In Process (RIP)
account and expenses all conversion costs to Cost of Goods Sold. At the end of each month,
all inventories are counted; their conversion cost components are estimated and inventory
account balances are adjusted accordingly. Raw material is backflushed from RIP to
Finished Goods. The following information is for the month of August.

1 Management Accounting-MEMORY AID

 Republic of the Philippines
BATANGAS STATE UNIVERSITY

MODULE IN MANAGEMENT ACCOUNTING

________________________________________________________________________________________________________
RIP beginning, including P25,560 of conversion cost
P42,600

FG beginning, including P27,000 of conversion cost P45,000

Raw Materials purchased on credit P356,000

RIP end, including P13,500 of conversion cost estimate P22,500

FG end, including P9,600 of conversion cost estimate P16,000

Direct Labor – P350,000; factory overhead – P196,150,000

Required: Prepare all journal entries that involve the RIP account and/ or finished goods
account

Problem 2

The Magnolia Corporation has a cycle time of l.5 days, uses a raw and in process account,
and charges all conversion costs to Cost of Goods Sold. At the end of each month, all
inventories are counted, their conversion cost components are estimated, and inventory
account balances are adjusted. Raw materials cost is backflushed from raw and in process
account to finished goods. The fallowing information is for July.

Beginning balance of RIP account, including P23,400

P14,040 of conversion cost

Beginning balance of finished goods account,

including Pl4,400 ofconversion cost P24,000

Raw materials received on credit

P444,000

Ending RIP inventory per physical count including

P15,360 conversion cost estimate P25,600

Ending FG inventory per physical count, including

Pl 1,400 conversion cost estimate P19,000

Conversion cost (direct labor – P210,000; factory overhead - PI89,000)

Required: Journal entries to record the given transactions

2 Management Accounting-MEMORY AID

 Republic of the Philippines
BATANGAS STATE UNIVERSITY

MODULE IN MANAGEMENT ACCOUNTING

________________________________________________________________________________________________________

Problem 3

The Smart Manufacturing Company has a cycle time of 3.0 days, uses a Raw and In Process
accpunt and charges all conversion cost to Cost of Goods Sold. At the end of each month, all
inventories are accounted, their conversion cost components are estimated and inventory
account balances are adjusted. Raw material cost is backflushed From RIP to Finished
Goods. The following information is for the month of June.

Materials purchased on credit P146,000

RIP beginning, including P4,400of conversion costs 15, 000

FG beginning, including P10,800 of conversion cost 36,000

RIP end, including P7,800 of conversion cost 24,000

FG end, including P6,500 of conversion cost 18,000

Conversion cost – P80,00 direct labor and P100,000 overhead

Requirements

1. Compute for the amount of materials backflushed from RIP to Finished Goods
2. Compute for amount of materials backflushed from Finished Goods to CofGS.
3. Journal entries to record the above transactions

Problem 4

The Chiz Manufacturing Company has a cycle time of 2.0 days, uses a Raw and In Process
account (RIP) and charges all conversion costs to Cost of Goods Sold. At the end of each
month, all inventories are counted, their conversion cost components are estimated and
inventory account balances are adjusted. Raw materials cost is backflushed from RIP to
Finished Goods. The following is for the month of May.

RIP beginning, including P12,000 of conversion cost

FG beginning, including P8,800 of conversion cost

Raw Materials purchased on credit

RIP End, including P15,700 of conversion cost

FG end, including P13,100 of conversion cost

Conversion Cost- P180,000 of direct labor and P225,000 of overhead

Requirements:
3 Management Accounting-MEMORY AID
 Republic of the Philippines
BATANGAS STATE UNIVERSITY

MODULE IN MANAGEMENT ACCOUNTING

________________________________________________________________________________________________________
1. Amount of materials backflushed from RIP to Finished Goods
2. Amount of materials backflushed from Finished Goods to Cost of Goods Sold.
3. Journal Entries to record the given Instructions

4 Management Accounting-MEMORY AID