Question
Exercise 17-51 (Algo) Relevant Cost Analysis-Conversion to JIT; Spreadsheet Application [LO 17-1, 17-5] As part of its commitment to quality, the J. J. Borden
Exercise 17-51 (Algo) Relevant Cost Analysis-Conversion to JIT; Spreadsheet Application [LO 17-1, 17-5] 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 Manufacturing costs as percentage of sales: Product-level support Variable manufacturing overhead Direct materials Direct manufacturing labor Other Financial Data: Sales revenue Inventory of WIP Other Data: Manufacturing cycle time Inventory financing costs (per annum) Existing Situation 12% 29 31 $ 1,440,000 270,000 60 days 10% After Adopting JIT 6% 12 21 15 $ 1,830,000 48,000 30 days 10%
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