Question

Product Costing in a JIT/Lean Environment

Doll Computer manufactures laptop computers under its own brand, but acquires all the components from outside vendors. No computers are assembled until the order is received, the bill of materials required to fill the order is prepared automatically and sent electronically to the various vendors. All components are received from vendors within three days and the completed order is shipped to the customer immediately when completed, usually on the same day the components are received from vendors. The number of units in process at the end of any day is negligible.

The following data are provided for the most recent month of operations:

Actual components cost incurred $916,000

Actual conversion costs incurred 193,000

Units in process, beginning of month 0

Units started in process during the month 4,000

Units in process, end of month 0

Assuming Doll uses traditional cost accounting procedures:

1. How much cost was charged to Work-in-Process during the month?

2. How much cost was charged to cost of goods sold during the month?

Assuming Doll is lean production company and uses backflush costing method:

1. How much cost was charged to Work-in-Process during the month?

2. How much cost was charged to cost of goods sold during the month?

Answer 1