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:

Item	Existing Situation				After Adopting JIT
Manufacturing costs as percentage of sales:
Product-level support		13	%			4	%
Variable manufacturing overhead		29				11
Direct materials		31				21
Direct manufacturing labor		20				13
Other financial data:
Sales revenue	$	1,355,000			$	1,660,000
Inventory of WIP		185,000				31,000
Other data:
Manufacturing cycle time		60	days			30	days
Inventory financing costs (per annum)		10	%			10	%

Required:

As the management accountant for the company, prepare an estimate the financial benefits associated with the adoption of JIT. Specifically, what is the estimated change in annual operating income attributable to the JIT implementation?