A Firm That Has Implemented JIT Had the Following Transactions

question 118

Multiple Choice

A firm that has implemented JIT had the following transactions:
1. Materals were purchased an account for $40,000
2. Materials were placed inta production.
3. Actual direct labour costs were $6,000.
4. Actual averhead costs were $40,000.
5. Conversion costs applied were $42,000.
6. All work was completed for the month.
7. All completed work was sald.
8. The variance is recoprized.
-Refer to the figure.What will be the entry to record materials placed into production using the back flush approach?

• A)\(\begin{array}{ll}
• \text { Materials and In Process Inventory } & 40,000 \\
• \quad \text { Work-in-Process Inventory } &\quad\quad\quad 40,000
• \end{array}\)
• B)\(\begin{array}{llr}
• \text { Materials Inventory } &40,000\\
• \text { Accounts Payable } &&40,000\\
• \end{array}\)
• C)\(\begin{array}{ll}
• \text { Work-in-Process Inventory } & 40,000 \\
• \text { Materials and In Process Inventory }&& 40,000
• \end{array}\)
• D)No entry is required

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Definitions:

Computed NPV

The calculated Net Present Value based on a specific discount rate and series of cash flows.

Perpetual Cash Flows

Cash flows that are expected to continue indefinitely without an end.

D/E Ratio

Debt-to-Equity Ratio, a measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity.

Equity Costs

The cost of obtaining capital through the sale of shares in the company, including dividends payouts and the dilution of share value.