Homer Manufacturing produces different models of 22-calibre rifles. The manufacturing costs assigned to its economy model rifle before and after installing JIT are given in the table on the following page. Cell workers do all maintenance and are also responsible for mov¬

ing materials, cell janitorial work, and inspecting products. Janitorial work outside the cells is still handled by the janitorial department.

In both the pre- and post-JIT setting, 10,000 units of the economy model are manufac¬

tured. In the JIT setting, manufacturing cells are used to produce each product. The man¬

agement of Homer Manufacturing reported a significant decrease in manufacturing costs for all of its rifles after JIT was installed. It also reported less inventory-related costs and a significant decrease in lead times. Accounting costs also decreased because Homer switched from a job costing system to a process costing system.

Required:
1. Compute the unit cost of the product before and after JIT.
2. Explain why the JIT unit cost is more accurate. Also explain what JIT features may have produced a decrease in production costs. Use as many specific cost items as possible to illustrate your explanation.
3. Explain why Homer Manufacturing switched from a job costing system to a process costing system after JIT was implemented.
4. Classify the costs in the JIT environment according to how costs are assigned to the cell:
direct tracing, driver tracing, or allocation. Which cost assignment method is most com¬
mon? What does this imply regarding product costing accuracy?

Transcribed Image Text:

Before After $ 55,000 Direct materials Direct labor $ 60,000 40,000 50,000 Maintenance Inspection Rework 50,000 30,000 30,000 10,000 60,000 9,000 Power 10,000 6,000 Depreciation 12,500 10,000 Material handling 8,000 2,000 Engineering 80,000 50,000* Setups 15,000 0 Janitorial 40,000 20,000 Building and grounds 11,800 12,400 Supplies 4,000 3,000 Supervision (plant) 10,000 8,000 Cell supervision 35,000 Cost accounting 40,000 25,000 Departmental supervision 18,000 Total $489,300 $325,400