Question 4 (20 marks) Star Manufacturing Company (Star) manufactures different types of home appliances. The Plant Manager believes that a JIT Production System can bring significant benefit to the company. He is considering implementing JIT production for the food processor business line operating at the company's Shenzhen Plant. As the management accountant of Star you are asked to evaluate the proposal by comparing benefit and cost if JIT production is adopted. You have collected the following estimates after a discussion with the Plant Manager 1. 2. Average inventory would decline by 80% from the cu nt level of 3. The expected savings from insurance, space, warehousing costs would be 4. Rework costs would be reduced by 20% due to quality improvement Annual cost for JIT production implementation would be $500,000 $3,000,000 80% of the current level of $600,000 achieved from the JIT production system. Star currently incurs $200,000 in annual rework costs. 5 The existing annual sales of the food processor are 100,000 units at selling price $2,000 each. Improved product quality under JIT production would enable Star to deliver better value to customers in a speedy manner. The company is able to charge a higher price of $2,005 per However, to prevent any lost sales due to stockouts, an incremental cost of $100,000 in overtime premiums is expected to incur cach year Required a) From a financial perspective, should Star implement JIT production at 9 marks) its Shenzhen Plant? Explain. b) Name five nonfinancial and qualitative factors Star should conside 5 marks) when making the decision to adopt JIT production c Suppose Star has implemented JIT production at its Shenzhen Plant. 6 marks) Give six examples of the performance measures (financial and non- financial) that Star could use to evaluate and control JIT production