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What is the estimated financial advantage of changing

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Question - Katy, Inc., manufactures smarthphones. It is considering to implementation of a JIT sysytem. Costs to reconfigure the production line will amount $200,000 annually. Estimated benefits from the change to JIT are as follows: the quality advantages of JIT should reduce current rework cost of $300,000 by 25%. Materials storage, handling, and insurance costs of $250,000 would be reduced by an estimated 40%. Average inventory is expected to decline by 300,000 units, and the carrying cost per unit is $0.35.

Required:

1. What is the estimated financial advantage(disadvantage) of changing to a JIT system?

2. Are there any nonfinancial advantages(disadvantages) of changing to a JIT system?

Reference no: EM131794107

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