Q.37PGA-3 - Horngren'S Financial And Managerial Accounting

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

3. Use a T-account to determine the March 31, 2018, balance of Raw and In-Process Inventory.

 

Step-by-Step Solution

Answer

Answer

The ending balance for Raw and In-process Inventory account amounts to $6,500.

Step 1: Raw and In-process Inventory

Raw and In-process inventory account is a combination of both raw inventory account and work-in-process inventory account. Under the JIT system cost of goods sold is not recorded until units are completed. So there is no track record of raw material to work in the process to finished goods inventory for COGS. There is only one combined account used. 

 

Step 2: Raw and In-process inventory account for “Low Range”

Date	Particular	Amount	Date	Particular	Amount
March 1	To Balance b/d	$ 9,000	Trans. 3	By Finished Goods Inventory	$180,000
Trans. 1	To Accounts Payable	177,500	March 31	By Balance c/d	6,500