Q37PGA-2
Question
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
2. Prepare summary journal entries for March. Underallocated or overallocated conversion costs are adjusted to Cost of Goods Sold monthly.
Step-by-Step Solution
VerifiedAnswer
The unallocated conversion cost amounts to $101,000.
| Journal entry |
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Date | Description | Debit | Credit |
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Trans. 1 | Raw and In-Process Inventory | $ 177,500 |
|
| Accounts Payable |
| $ 177,500 |
| Being inventories purchased on credit |
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|
|
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Trans. 2 | Conversion Costs | 521,000 |
|
| Labor and overheads cost payable |
| 521,000 |
| Being conversion cost incurred |
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Trans. 3 | Finished goods inventory | 600,000 |
|
| Raw and In-process inventory |
| 180,000 |
| Conversion Costs |
| 420,000 |
| Being completed 15,000 goods transferred to the finished inventory account at standard cost |
|
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Date | Description | Debit | Credit |
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Trans. 4 | Accounts Receivables | $ 730,000 |
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| Sales Revenue |
| $ 730,000 |
| Being goods sold on credit |
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Trans. 5 | Cost of goods sold | 584,000 |
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| Finished goods inventory |
| 584,000 |
| Being cost of goods sold for sold units at standard cost |
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Date | Description | Debit | Credit |
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Trans. 6 | Cost of goods sold | $ 101,000 |
|
| Conversion cost |
| $ 101,000 |
| Being under allocated conversion cost transferred to cost of goods sold account |
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