Question & Answer: High Range produces fleece jackets. The company uses JIT costing for its JIT production system. High Range has two inventory High Range produces fleece jackets. The company uses JIT costing for its JIT production system. High Range has two inventory…..

High Range produces fleece jackets. The company uses JIT costing for its JIT production system. High Range 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, $10,000; Finished Goods Inventory, $2,400. The standard cost of a jacket is $42, composed of $17 direct materials plus $25 conversion costs. Data for February’s activities follow:

Expert Answer

1. The major features of a JIT production system are:

a)Just-in-time manufacturing keeps stock holding costs to a bare minimum.

b)Just-in-time manufacturing eliminates waste, as out-of-date or expired products

c)Just-in-time production works on a demand-pull basis, so all goods made would be sold.

d) High quality products and greater efficiency can be derived from following a just-in-time production system.

e)Due to the aforementioned low level of stocks held, the companys return on investment would generally be high.

Date	Particulars	Debit ($)	Credit ($)
	Raw Material	352000
	Conversion costs	630000
	To Cash		982000

	Raw and work in process inventory	982000
	To Raw Material		352000
	To Conversion costs		630000

	Cost of goods sold	865200
	To Direct Materials		350200
	To Conversion Costs		515000

	Cash	1442000
	To Sales		1442000

	Cost of goods sold	103000*
	To Raw and work in process inventory		103000
	(Conversion costs is under allocated)

* Conversion cost incurred per jacket = $630000/21000 = $30 per Jacket

Standerd Cost of conversion cost per jacket = $25 per jacket

Under allocated conversion cost per jacket = $30 – $25 = $5 per jacket

Under allocated conversion cost = 20600*$5 = $103000

3). T – account of Raw and Work in Process Inventory account.

Particulars	Debit Amount ($)	Particulars	Credit Amount ($)
To Opening Balance	10000	By Cost of goods sold	865200
To Direct Raw Material	352000	By Cost of Goods sold	103000
To Conversion Cost	630000	By Closing Balance	23800
	992000		99200

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