Homework SourseLow Range produces fleece jackets The company uses JIT costi
Low Range produces fleece jackets. The company uses JIT costing for its JIT production system. Low RangeLow has two inventory accounts: Raw and In-Process Inventory and Finished Goods Inventory. On February 1, 2016, the account balances were Raw and In-Process Inventory, $14,000; Finished Goodsinventory, 2,500. The standard cost of a jacket is $41, composed of $17 direct materials plus $24 conversion costs. Data for February’s activities follow:
Number of jackets completed
18,000
Number of jackets sold (on account, for $90 each)
17,600
Direct materials purchased (on account)
$296,000
Conversion costs incurred
$532,000
Requirements
1.
What are the major features of a JIT production system such as that of Low Range?
2.
Prepare summary journal entries for February. Underallocated or overallocated conversion costs are adjusted to Cost
Of Goods sold Monthly
3.
Use a T-account to determine the February 29, 2016, balance of Raw and In-Process Inventory.
| 1. | What are the major features of a JIT production system such as that of Low Range? |
| 2. | Prepare summary journal entries for February. Underallocated or overallocated conversion costs are adjusted to Cost Of Goods sold Monthly |
| 3. | Use a T-account to determine the February 29, 2016, balance of Raw and In-Process Inventory. |
Solution
1. Just in time means where the items are produced according to the need in order to reduce the inventory surplus. The main features of JIT production system such as that of low range:
1. Wastage of inventory will be low.
2. Investment/Capital tied up in inventory will be low.
3. Carrying cost of inventory in warehouses will be low.
4. Reduction in inventory levels.
2. Journal Entries:
3.
| Date | Particulars | Debit | Credit |
| Raw and Inprocess Inventory | 296,000.00 | ||
| Accounts Payable | 296,000.00 | ||
| (given in question as raw materials purchased on account) | |||
| ******************************************************* | |||
| Conversion Costs | 532,000.00 | ||
| To Various accounts(wages payable, Acc dep on PPE) | 532,000.00 | ||
| (given in question as conversion costs incurred) | |||
| ******************************************************* | |||
| Fininshed Goods Inventory(18000*41) | 738,000.00 | ||
| To Raw and Inprocess Inventory(18000*17) | 306,000.00 | ||
| To Conversion Costs(18000*24) | 432,000.00 | ||
| (Being RM costs and conversion costs converted to FG) | |||
| ******************************************************* | |||
| Cost of goods sold(17600*41) | 721,600.00 | ||
| To Finished Goods Inventory(17600*41) | 721,600.00 | ||
| (Being cost of FG sold transferred to Cost of goods sold account) | |||
| ******************************************************* | |||
| Accounts Receivable(17600*90) | 1,584,000.00 | ||
| To Sales | 1,584,000.00 | ||
| (Being goods sold on account) | |||
| ******************************************************* | |||
| Cost of goods sold(532000-432000) | 100,000.00 | ||
| To Conversion Costs | 100,000.00 | ||
| (Being underallocated costs transferred to COGS) | |||
| ******************************************************* |
