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The Iron Hardware Company manufactures specialty brass door handles at its Saint Anne plant. Iron is considering implementing a JIT production system. The following are
The Iron Hardware Company manufactures specialty brass door handles at its Saint Anne plant. Iron is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production:Estimated costs and benefits
a
Annual additional tooling costs would be $ comma
b
Average inventory would decline by from the current level of $ comma comma
c
Insurance space, materialshandling, and setup costs, which currently total $ comma annually would decline by
d
The emphasis on quality inherent in JIT production would reduce rework costs by Iron currently incurs $ comma in annual rework costs.
e
Improved product quality under JIT production would enable Iron to raise the price of its product by $ per unit. Iron sells comma units each year. Irons required rate of return on inventory investment is per year Required
Calculate the net benefit or cost to Iron if it adopts JIT production at the Saint Anne plant.
What nonfinancial and qualitative factors should Iron consider when making the decision to adopt JIT production?
Suppose Iron implements JIT production at its Saint Anne plant. Give examples of performance measures Iron could use to evaluate and control JIT production. What would be the benefit of Colonial implementing an enterprise resource planningERP system? Requirement Calculate the net benefit or cost to Iron if it adopts JIT production at the Saint Anne plant.
Fill in the table below showing the relevant costs under current production system and under the JITLOADING... system. Use parentheses or a minus sign to indicate inflows. Leave unused cells blank, do not enter Round your answers to the nearest whole dollar.
Annual Relevant Costs of Current Production System and JIT Production System for Iron Hardware Company
Relevant Items
Relevant Costs under Current Production System
Relevant Costs under JIT Production System
Annual tooling costs
Required return on investment:
Average inventory per year
Insurance, space, materials handling, and setup costs
Rework costs
Incremental revenues from higher selling prices
Total net incremental costs
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