=+‘Charles’, Richardson began, ‘I would like to substantially simplify our accounting in the new JIT environment. Can’t we just record one journal entry at the time we ship products to our customers? I don’t want to have our staff spending time tracking inventory from one stage to the next, when we have as little inventory as we do.’

‘Brian’, Cheng said, ‘I think you are right about simplifying the accounting, but we still have a fair amount of direct materials and finished goods inventory that varies from period to period, depending on the demand for specific products. Doing away with all inventory accounting may be a problem.’

‘Well’, Richardson replied, ‘you know my desire to simplify, simplify, simplify. I know that there are some costs of oversimplifying, but I believe that, in the long run, simplification pays dividends. Why don’t you and your staff study the issues involved, and I will put it on the agenda for our next management meeting.’

Required