80.2K

Verified Solution

Link Copied!

1, 17-5) 17-51 Relevant Cost Analysis-Conversion to JIT; Spreadsheet Application As part of its com- mitment to quality, the J. J. Borden manufacturing company is proposing to introduce just-in-time (JIT) production methods. Managers of the company have an intuitive feel regarding the financial benefits associated with a change to JIT, but they would like to have some data to inform their deci- sion making in this regard. You are provided with the following data: Item Existing Situation After Adopting JIT 12% 28 30 22 5% 10 20 15 Manufacturing Costs as Percentage of Sales: Product-level support Variable manufacturing overhead Direct materials Direct manufacturing labor Other Financial Data: Sales revenue Inventory of WIP Other Data: Manufacturing cycle time Inventory financing costs (per annum) $1,350,000 180,000 $1,650,000 30,000 60 days 10% 30 days 10% vel Control Required 1. As the management accountant for the company, construct an Excel spreadsheet that can be used to estimate the financial benefits associated with the adoption of JIT. Specifically, what is the estimated change in annual operating income to the nearest whole dollar) attributable to the JIT implementation? 2. Provide some explanations as to how or why sales would be expected to increase after a JIT implementation 3. In the above example, a reduction of both direct and indirect (i.e., support) costs are predicted. Explain how or why a reduction in each of these two classes of cost might occur in conjunction with a JIT implementation

Answer & Explanation Solved by verified expert

See Answer