Exercise 5 (Short Computations – Backflush Costing)

1. Giardini del Sole Wooden Furnitures uses a Raw and In Process (RIP) inventory account. Raw
material cost is backflushed from RIP to Finished Goods account. The following data pertains to the
month of March, 2019:

Beginning balance of RIP account P30,000

Raw materials purchased 350,000
Conversion costs incurred 5,700
Conversion costs allocated 4,300
Ending balance of RIP account 39,200

Required: Compute for the amount of direct materials and conversion costs to be backflushed to
Finished Goods.

2. FLM Company, manufacturer of ballpens, has recently decided to implement a JIT costing system.
Transactions for June are as follows:
a. Raw materials were purchased at cost of P900,000.
b. All raw materials purchased were requisitioned for production.
c. Direct labor costs of P2,000,000 were incurred.
d. Actual factory overhead costs amounted to P5,000,000.
e. Applied conversion costs total P8,000,000, which includes the P2,000,000 direct labor.
f. All units were completed.

Required: Determine the amount to be backflushed from Raw and In Process (RIP) to Finished Goods
(FG) and the amount of Finished Goods after all transactions have been completed.

3. HV Manufacturing uses backflush costing to account for an electronic meter it makes. During June
2019, the firm produced 15,000 meters of which it sold 15,800. The standard cost for each meter is:

Direct materials P30

Conversion costs 55
P85

Assume that the firm had no inventory on June 1. The following events took place in June:
a. Purchased P350,000 of direct materials
b. Incurred P705,000 of conversion costs
c. Applied P990,000 to Raw and In Process Inventory (RIP)
d. Finished 18,000 meters.
e. Sold 17,800 meters for P98 each.

Required: Determine the amount to be backflushed from RIP to Finished Goods and the June 30
(ending balance) of Finished Goods account.
4. Rigel Company uses a backflush cosing system with three trigger points. There are no beginning
inventories. The following data pertain to July, 2019:

Raw materials purchased P850,000

Raw materials used 820,000
Conversion costs incurred 392,000
Conversion costs allocated to finished goods 370,000
Costs transferred to finished goods 950,000
Costs of goods sold 890,000

Required: Compute for the balance of Raw and In Process (RIP) account for July, 2019.

5. Eagleman Company produces portable DVD. For the month of November, there were no beginning
inventory of raw materials and no beginning and ending balances for Work-in-Process. It uses JIT
manufacturing system and backflush costing with two trigger points in its accounting system: (1)
purchase of raw materials and (2) sale of finished goods.

The standard cost per unit for direct materials is P30 and conversion cost P10. The following data
pertains to November production:

Raw materials purchased P10,500,000

Conversion costs incurred 7,340,000
Number of finished units manufactured 250,000
Number of finished units sold 234,000

Required: Compute the balances of RIP and CGS accounts at the end of November.