As part of its commitment to quality, the J. J. Borden manufacturing company is proposing to introduce just-in-time (JIT) production methods. Managers of the company have an intuitive feel regarding the financial benefits associated with a change to JIT, but they would like to have some data to inform their decision making in this regard. You are provided with the following data:

Existing Situation After Adopting JIT Item Manufacturing costs as percentage of sales: Product-level support Variable manufacturing overhead Direct materials Direct manufacturing labor 15% 28 4% 10 20 30 20 13 Other financial data: Sales revenue Inventory of WIP $ 1,430,000 260,000 $ 1,810,000 46,000 Other data: Manufacturing cycle time Inventory financing costs (per annum) 60 days 10% 30 days 10% Items Current Situation After JIT Change Sales Less: Costs Product-level support Variable manufacturing overhead Direct materials Direct manufacturing labor Inventory financing costs Operating profit