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, $13,000; Finished Goods Inventory, $2,000.
The standard cost of a jacket is $36, composed of $16 direct materials plus $20 conversion costs. Data for February’s activities follow:
Number of jackets completed............ 19,000
Number of jackets sold (on account for $95 each) ..... 18,600
Direct materials purchased (on account).......$ 299,000
Conversion costs incurred.............$ 470,000
Requirements
1. What are the major features of a JIT production system such as that of High Range?
2. Prepare summary journal entries for February. Under-allocated or over-allocated 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.