Compute the unit cost of the product before and after JIT Explain why the JIT unit cost is more Also explain what JIT features may have produced a decrease in production costs. Use as many specific cost items as possible to illustrate your explanation. Explain why Homer Manufacturing switched from a job-order costing system to a process-costing system after JIT was implemented.
Homer Manufacturing produces different models of 22-calibre rifles. The
installing JIT are given in the following table. Cell workers do all maintenance and are also responsible for moving materials, cell janitorial work, and inspecting products. Janitorial work outside the cells is still handled by the Janitorial Department. In both the pre- and post-JIT setting, 10,000 units of the economy model are manufactured. In the JIT setting, manufacturing cells are used to produce each product. The management of Homer Manufacturing reported a significant decrease in manufacturing costs for all of its rifles after JIT was installed. It also reported less inventory-related costs and a significant decrease in lead times. Accounting costs also decreased because Homer switched from a
Before After
Direct Material 60.000 55.000
Direct labor 40.000 50.000
Maintenance 50.000 30.000
Inspection 30.000 10.000
Rework 60.000 9.000
Power 10.000 6.000
Material Handlings 8.000 2.000
Engineering 80.000 50.000
Setups 15.000 0
Janitorial 40.000 20.000
Building and grounds 11.800 12.400
Supplies 4.000 3.000
Supervision (plant) 10.000 8.000
Cell Supervision - 35.000
Cost Accounting 40.000 25.000
Departmental supervision 18.000 -
489.300 325.400
Required:
- Compute the unit cost of the product before and after JIT
- Explain why the JIT unit cost is more Also explain what JIT features may have produced a decrease in production costs. Use as many specific cost items as possible to illustrate your explanation.
- Explain why Homer Manufacturing switched from a job-order costing system to a process-costing system after JIT was implemented.
- Classify the costs in the JIT environment according to how they are assigned to the cell: direct tracing, driver tracing, or Which cost assignment method is most common? What does this imply regarding product-costing accuracy?
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