Estimate financial benefits associated with adoption of jit

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Reference no: EM13876396

Relevant Cost Analysis-Conversion to JIT As part of its commitment 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 decision making in this regard. You are provided with the following data:

Item

Existing Situation

After Adopting JIT

Manufacturing Costs as Percentage of Sales:

Product-level support costs

12%

5%

Variable manufacturing overhead

28%

10%

Direct materials

30%

20%

Direct manufacturing labor

22%

15% (Continued)

Other Financial Data:

Sales revenue

$1,350,000

$1,650,000

Inventory of WIP

$180,000

$30,000

Other Data:

Manufacturing cycle time

60 days

30 days

Inventory financing cost (perannum)

10%

10%

Required: You have been asked, in conjunction with your position as the management accountant for the company, to construct an Excel spreadsheet that can be used to estimate the financial benefits associated with the adoption of JIT.

Reference no: EM13876396

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