Q19-16RQ - Horngren'S Financial And Managerial Accounting

Question

What are the inventory accounts used in JIT costing?

Step-by-Step Solution

Answer

There are two inventory accounts that are used under JIT costing-

1) Raw and In-Process Inventory

2) Finished goods inventory

JIT costing

Just-in-time (JIT) costing is a costing system that determines the manufacturing cost and assigned them to the sold and ending inventories when the output is completed. JIT costing does not track the cost of products from raw material to finished goods but instead records the cost of production until the production is completed

Accounts used in JIT costing

As JIT costing does not track the cost from the raw material to WIP to finished goods, there is a single account is used that combines the raw material and work in process inventory called the Raw and In-Process Inventory account for procuring inventory.

Also as JIT costing does not tract the cost from raw material to WIP to finished goods, The cost of direct labor and overheads are combined into the conversion cost, and the cost of the finished product is the combination of these two costs. 

 

Thus, the inventory accounts used under the JIT costing are as follows –

1) Raw and In-Process Inventory

2) Finished goods inventory