Freeze Point produces fleece jackets. The company uses JIT costing for its JIT production system. Freeze Point 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 $35, composed of $13 direct materials plus $22 conversion costs. Data for February’s activities follow:
Number of jackets completed............. 16,000
Number of jackets sold (on account, for $95 each) ...... 15,600
Direct materials purchased (on account)........$ 200,500
Conversion costs incurred.............$ 452,000
Requirements
1. What are the major features of a JIT production system such as that of Freeze Point?
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