Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 $ 240 comma 000.
b.
Average inventory would decline by 80% from the current level of $ 2 comma 015 comma 000.
c.
Insurance, space, materials-handling, and setup costs, which currently total $ 625 comma 000annually, would decline by 25%.
d.
The emphasis on quality inherent in JIT production would reduce rework costs by 30%. Iron currently incurs $ 420 comma 000 in annual rework costs.
e.
Improved product quality under JIT production would enable Iron to raise the price of its product by $ 16 per unit. Iron sells 42 comma 500 units each year. Iron's required rate of return on inventory investment is 25% per year Required
1.
Calculate the net benefit or cost to Iron if it adopts JIT production at the Saint Anne plant.
2.
What nonfinancial and qualitative factors should Iron consider when making the decision to adopt JIT production?
3.
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 planning(ERP) system? Requirement 1. 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"0". 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

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

Step: 3

blur-text-image

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

Cost Accounting Planning And Control

Authors: Adolph Matz, Milton F. Usry

10th Edition

0538809256, 978-0538809252

More Books

Students also viewed these Accounting questions

Question

Explain the triple constraint. Why is it so important?

Answered: 1 week ago

Question

what type of analytcis answers questions like "what should I do ? "

Answered: 1 week ago