Question

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 Goods​inventory, 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.

Answer 1

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:

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)
*******************************************************

3.

Raw and In Process Inventory
Date	Particulars	Amount	Date	Particulars	Amount
	To Opening Balance(given)	14,000.00		By Fininshed Goods Inventory	306,000.00
	To Accounts Payable	296,000.00		By balance c/d(Bal.Fig)	4,000.00
	Total	310,000.00		Total	310,000.00
	To balance b/d	4,000.00