What is the annual cost savings expected to result

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Reference no: EM131316883

Geet Industries wants to install a just-in-time (JIT) inventory system in order to significantly reduce its in-process inventories. The annual cost of the system is gauged to be $95,000. The financial manager estimates that with this system, the firm's average inventory investment will decline by 40 percent from its current level of $2.05 million.

All other costs are expected to be unaffected by this system. The firm can earn 14 percent per year on equal-risk investments.

a. What is the annual cost savings expected to result from installation of the proposed JIT system?

b. Should the firm install the system?

Reference no: EM131316883

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