Q37PGA-2 Question:聽Low Range produces fl... [FREE SOLUTION]

Chapter 19: Q37PGA-2 (page 1077)

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鈥檚 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.

Expert verified

Answer

The unallocated conversion cost amounts to $101,000.

	Journal entry
Date	Description	Debit	Credit

Trans. 1	Raw and In-Process Inventory	$ 177,500
	Accounts Payable		$ 177,500
	Being inventories purchased on credit

Trans. 2	Conversion Costs	521,000
	Labor and overheads cost payable		521,000
	Being conversion cost incurred

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

Date	Description	Debit	Credit

Trans. 4	Accounts Receivables	$ 730,000
	Sales Revenue		$ 730,000
	Being goods sold on credit

Trans. 5	Cost of goods sold	584,000
	Finished goods inventory		584,000
	Being cost of goods sold for sold units at standard cost

Date	Description	Debit	Credit

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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Activity	Budgeted Cost of Activity	Allocation Base	Predetermined Overhead Allocation Rate

Materials handling	\( 240,000	Number of parts	\)1.00
Assembly	3,500,000	Number of assembling direct labor hours	17.00
Finishing	190,000	Number of finished units*	4.50

Product	Total Units Produced	Total Direct materials Costs	Total Direct Labor Costs	Total Number of Parts	Total Assembling Direct Labor Hours

Standard bookcase	7,000	\(91,000	\)105,000	28,000	10,500
Unfinished bookcase	7,500	82,500	75,000	22,500	7,500