The Northern Hardware Company manufactures specialty brass door handles at its SaintAnne plant. Northern is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT?production:

Northern?'s required rate of return on inventory investment is 25?% per year.

0 Estimated costs and benets - X a. Annual additional tooling costs would be $220,000. b. Average inventory would decline by 80% from the current level of $2,035,000. 0. Insurance, space, materials-handling, and setup costs, which currently total $605,000 annually, would decline by 25%. d. The emphasis on quality inherent in JIT production would reduce rework costs by 30%. Northern currently incurs $380,000 in annual rework costs. e. Improved product quality under JIT production would enable Northern to raise the price of its product by $12 per unit. Northern sells 40,500 units each year. Print Done X H Required 1. Calculate the net benefit or cost to Northern if it adopts JIT production at the Saint Anne plant. 2. What nonfinancial and qualitative factors should Northern consider when making the decision to adopt JIT production? 3. Suppose Northern implements JIT production at its Saint Anne plant. Give examples of performance measures Northern could use to evaluate and control JIT production. What would be the benefit of Colonial implementing an enterprise resource planning (ERP) system? Print DoneAnnual Relevant Costs 01 Current Production System and JIT Production System for Northern Hardware Company Relevant Costs under Current Production Relevant Costs under JIT Relevant Items System 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 OOStS