Problem:
Recording manufacturing costs for a JIT costing system
High Point produces fleece jackets. The company uses JIT costing for its JIT production system. High Point has two inventory accounts: Raw and in-process inventory and Finished goods inventory. On February 1, 2012, the account balances were Raw and in-process inventory, $7,000; Finished goods inventory, $2,200. The standard cost of a jacket is $37, comprised of $13 direct materials plus $24 conversion costs. Data for February's activities follow:
|
Number of jackets completed
|
20,000
|
Direct materials purchased
|
$ 257,500
|
|
Number of jackets sold
|
19,600
|
Conversion costs incurred
|
$ 580,000
|
Requirements
1. What are the major features of a JIT production system such as that of High Point?
2. Prepare summary journal entries for February. Under- or overallocated conversion costs are closed to Cost of goods sold monthly.
3. Use a T-account to determine the February 29, 2012, balance of Raw and in-process inventory.