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Q.37PGA-1

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Horngren'S Financial And Managerial Accounting
Found in: Page 1077

Short Answer

Question: Low Range produces fleece jackets. The company uses JIT costing for its JIT production system.

Low Range has two inventory accounts: Raw and In-Process Inventory and

Finished Goods Inventory. On March 1, 2018, the account balances were Raw and In-Process Inventory, $9,000; Finished Goods Inventory, $1,700.

The standard cost of a jacket is $40, composed of $12 direct materials plus $28 conversion costs. Data for March’s activities follow:

Number of jackets completed 15,000

Number of jackets sold (on account, for $50 each) 14,600

Direct materials purchased (on account) $ 177,500

Conversion costs incurred $ 521,000

Requirements

1. What are the major features of a JIT production system such as that of Low Range?

Answer

JIT system has major features like frequent deliveries of inventories, reliable relationships with suppliers, work cell production facility, and demand pull production.

See the step by step solution

Step by Step Solution

Step 1: JIT Production System

The just-in-time production system is a cost system in which the products are produced just in time to on getting the order. The raw materials under this system are procured just in time for starting production. The production is done in small batches of goods.

Step 2: Features of the JIT production system

JIT production system has the following features –

a) Under the just-in-time production system, inventories are delivered frequently in small quantities. The deliveries are guaranteed with close to zero defect rate.

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