Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

James Corporation produces bucket loader assemblies for the tractor industry. The product has a long-term life expectancy. Smith has decided to implement a JIT inventory

James Corporation produces bucket loader assemblies for the tractor industry. The product has a long-term life expectancy. Smith has decided to implement a JIT inventory system. Smith is deciding whether to use ABC Co. or XYZ Co. as the supplier. The following relevant information is available for analysis:

One time cost to rearrange the shop floor into manufacturing cells is $305,000

Monthly demand is 1,000 units.

Purchase orders from ABC will cost $7.50 each. Purchase orders from XYZ will cost $7.00 each.

ABC will charge $110 per unit. XYZ will charge $100 per unit.

ABCs units will be inspected at a cost of 30 cents per unit.

Smiths required annual rate of return is 5%.

Stock-out costs are expected to be $3.50 per unit for ABC and $3.00 per unit for XYZ.

Stock-out units are expected to be 5% of the order quantity for ABC and 5% for XYZ. These stockouts are anticipated to occur during each reorder period.

Other annual carrying costs are 1% of the unit purchase cost for ABC and for XYZ.

Question:

1. From a quantitative perspective, which supplier should Jones use to implement the JIT system? Show the computations supporting your decision. Note that your solution should be in professional format, and should include a proper heading, date, consistent formatting, etc.

2. What is the minimum amount of cost savings (in dollars) that Smith would need to save by implementing the JIT system in order for the project to yield an acceptable return on investment?

Please show answer in Excel format

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles

Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso

11th Edition

111856667X, 978-1118566671

More Books

Students also viewed these Accounting questions

Question

What attracts you about this role?

Answered: 1 week ago

Question

How many states in India?

Answered: 1 week ago

Question

HOW IS MARKETING CHANGING WITH ARTIFITIAL INTELIGENCE

Answered: 1 week ago