Hepworth Company has implemented a JIT system and is consideringthe use of backflush costing. Hepworth had the followingtransactions for the current fiscal year:
1. Purchased raw materials on account for $600,000.
2. Placed all materials received into production.
3. Incurred actual direct labor costs of $90,000.
4. Incurred actual overhead costs of $625,000.
5. Applied conversion costs of $675,000.
6. Completed all work for the month.
7. Sold all completed work.
8. Computed the difference between actual and applied costs.
Required: 1. Prepare the journal entries for traditional andbackflush costing. For backflush costing, assume there are twotrigger points: (1) the purchase of raw materials, and (2) thecompletion of the goods.
2. Assume the second trigger point in Requirement 1 is the saleof goods. What would change for the backflush-costing journalentries?
3. What if there is only one trigger point and it is (a)completion of the goods or (b) sale of the goods? How would thebackflush-costing journal entries differ from Requirement 1 for (a)and (b)?
