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 Februarys activities follow:

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b)Just-in-time manufacturing eliminates waste, as out-of-date or expired products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