JIT production, relevant benefits, relevant costs. The Evans Corporation manufactures cordless telephones. Evans is planning to implement a JIT production system, which requires annual tooling costs of $180,000. Evans estimates that the following annual benefits would arise from JIT production.

a. Average inventory will decline by $840,000, from $1,080,000 to $240,000.

b. Insurance, space, materials-handling, and setup costs, which currently total $240,000, would decline by 30%.

c. The emphasis on quality inherent in JIT systems would reduce rework costs by 20%.

Evans currently incurs $420,000 on rework.

d. Better quality would enable Evans to raise the prices of its products by $3.60 per unit.

Evans sells 36,000 units each year.

Evans’s required rate of return on inventory investment is 12% per year.

Required 1. Calculate the net benefit or cost to the Evans Corporation from implementing a JIT pro¬

duction system.

2. What other nonfinancial and qualitative factors should Evans consider before deciding on whether it should implement a JIT system?