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Horngren'S Financial And Managerial Accounting
Found in: Page 1082

Short Answer

Question: High Mountain produces fleece jackets. The company uses JIT costing for its JIT production system.

High Mountain has two inventory accounts: Raw and In-Process Inventory and

Finished Goods Inventory. On April 1, 2018, the account balances were Raw and In-Process Inventory, $10,000; Finished Goods Inventory, $2,100.

The standard cost of a jacket is $33, composed of $12 direct materials plus $21

conversion costs. Data for April’s activities follow:

Number of jackets completed 19,000

Number of jackets sold (on account for $50 each) 18,600

Direct materials purchased (on account) $ 220,500

Conversion costs incurred $ 500,000


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

2. Prepare summary journal entries for April. Underallocated or overallocated

conversion costs are adjusted to Cost of Goods Sold monthly.

3. Use a T-account to determine the April 30, 2018, balance of Raw and In-ProcessInventory.

JIT production system has the main feature of having demand-pull production and the. The account balance for the Raw and In-process inventory account at the end of April is $2,500.

See the step by step solution

Step by Step Solution

Step-by-Step-SolutionStep1: 1) JIT Production system and its features

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

Features of JIT

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.

b) JIT production system ensures a reliable and trustworthy relationship with suppliers as it is the key to implementing the JIT system successfully.

c) Under the JIT system production is done in self-contained work cells which is an area equipped with needed facilities to manufacture.

d) JIT production system is based on the “demand-pull” system in which the production is triggered by the customer’s order.

Step 2: 2) Summary journal entries for April transactions

Journal entry





Trans. 1

Raw and In-Process Inventory

$ 220,500

Accounts Payable

$ 220,500

Being inventories purchased on credit

Trans. 2

Conversion Costs


Labor and overheads cost payable


Being conversion cost incurred

Trans. 3

Finished goods inventory


Raw and In-process inventory


Conversion Costs


Being completed 15,000 goods transferred to the finished inventory account at standard cost

Trans. 4

Accounts Receivables

$ 930,000

Sales Revenue

$ 930,000

Being goods sold on credit

Trans. 5

Cost of goods sold


Finished goods inventory


Being cost of goods sold for sold units at standard cost

Trans. 6

Cost of goods sold

$ 101,000

Conversion cost

$ 101,000

Being under-allocated conversion cost transferred to cost of goods sold account

Step 3: 3) Raw and In-process inventory account for “Low Range”







April 1

To Balance b/d

$ 10,000

Trans. 3

By Finished Goods Inventory


Trans. 1

To Accounts Payable


April 30

By Balance c/d


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