In 1926 Branky scott and his wife GV started a small company in India that pioneered the use of plastics in the manufacturing of marine products. Branky Manufacturing has evolved to produce thousands of products under the Branky Trademark which are sold into the fishing, marine, outdoor, and firefighting industries worldwide. To manage production costs, Branky is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production: - Annual additional tooling costs would be $400,000 - Annual inventory would decline by 80 percent from the current level of $4,000,000 - Insurance, material handling, and set-up costs which currently total $1,200,000 annually, would decline by 25% - Rework would be reduced by 30 percent. Branky currently incurs $800,000 in annual rework costs. Improved product quality under JIT production would enable Branky to raise the price of its products by $8 per unit. Scotty sells 80,000 units per year. - Branky required rate of return is 15 percent per year. QUESTION; to manage production cost what are the total relevant cost under the proposed JIT Production system?
In 1926 Branky scott and his wife GV started a small company in India that pioneered the use of plastics in the manufacturing of marine products. Branky Manufacturing has evolved to produce thousands of products under the Branky Trademark which are sold into the fishing, marine, outdoor, and firefighting industries worldwide. To manage production costs, Branky is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production:
- Annual additional tooling costs would be $400,000
- Annual inventory would decline by 80 percent from the current level of $4,000,000
- Insurance, material handling, and set-up costs which currently total $1,200,000 annually, would decline by 25%
- Rework would be reduced by 30 percent. Branky currently incurs $800,000 in annual rework costs.
Improved product quality under JIT production would enable Branky to raise the price of its products by $8 per unit. Scotty sells 80,000 units per year.
- Branky required
QUESTION;
to manage production cost
what are the total relevant cost under the proposed JIT Production system?
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