Back flush Costing
Automotive Parts Company produces 12 parts for car bodies and sells them to three automobile assembly companies in the United States. The company implemented lean operating and costing procedures three years ago. Overhead is applied at a rate of $26 per work cell hour used. All direct materials and purchased parts are used as they are received.
One of the company’s work cells produces automobile fenders that are completely detailed and ready to install when received by the customer. The cell is operated by four employees and involves a flexible manufacturing system with 14 workstations. Operating details for February for this cell are as follows:
| Beginning work in process inventory | — |
| Beginning finished goods inventory | $420 |
| Cost of direct materials purchased | |
| on account and used | $213,400 |
| Cost of parts purchased on account | |
| and used | $111,250 |
| Direct labor costs incurred | $26,450 |
| Overhead costs assigned | ? |
| Work cell hours used | 8,260 |
| Costs of goods completed during | |
| February | $564,650 |
| Ending work in process inventory | $1,210 |
| Ending finished goods inventory | $670 |
Required
1. Using T accounts, show the cost flows through a back flush costing system.
2. Using T accounts, show the cost flows through a traditional costing system.
3. What is the total cost of goods sold for the month?
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