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5 on 5 ed out of The Controller of Nip-it-in-the-Bud Inc. has studied the possibility of implementing a JIT production system. The annual incremental retooling
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on 5 ed out of The Controller of Nip-it-in-the-Bud Inc. has studied the possibility of implementing a JIT production system. The annual incremental retooling costs of the JIT system is projected to be about $67,000 however, the new system will lower insurance costs by $10,000 and storage costs will drop by $20,000 a year as the company will be able to reuse warehouse space for other strategic purposes. In addition, material handling costs will drop by $10,000 a year and because of a resulting increase in quality and faster delivery, the company's contribution margin on the product will increase by $2.00 on annual sales of 20,000 units. Calculate the net incremental benefit/costs of the JIT system implementation Select one: O 1. $17,000 costs O 2. $3,000 benefits O 3. $27,000 costs O 4. $13,000 benefits Step by Step Solution
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