Prior to install a JIT system, Buckner Company, a producer of automobile parts, used maintenance hours to assign maintenance costs to its three products (wheels, rims, and ball bearings). The maintenance costs totaled $12,000,000 per year. The machine hours used by each product and the quantity produced of each product are as follows: Wheels: Machine hours: 150,000 Qnty produced: 187,500 Rims: Machine hours: 300,000 Qnty produced: 281,250 Bearings: Machine hours: 350,000 Qnty produced: 350,000 After installing JIT, three manufacturing cells were created and the cell workers were trained to perfom preventive maintenance and minor repairs. A full-time maintenance person was also assigned to each cell. Maintenance costs for the three cells still totaled $12,000,000; however, these costs are now treaceable to each cell as follows: Cell, wheels: $2,640,000 Cell, rims: 4,560,000 Cell, bearings: 5,600,000
Prior to install a JIT system, Buckner Company, a producer of automobile parts, used maintenance hours to assign maintenance costs to its three products (wheels, rims, and ball bearings). The maintenance costs totaled $12,000,000 per year. The machine hours used by each product and the quantity produced of each product are as follows:
Wheels: Machine hours: 150,000 Qnty produced: 187,500
Rims: Machine hours: 300,000 Qnty produced: 281,250
Bearings: Machine hours: 350,000 Qnty produced: 350,000
After installing JIT, three manufacturing cells were created and the cell workers were trained to perfom preventive maintenance and minor repairs. A full-time maintenance person was also assigned to each cell. Maintenance costs for the three cells still totaled $12,000,000; however, these costs are now treaceable to each cell as follows:
Cell, wheels: $2,640,000
Cell, rims: 4,560,000
Cell, bearings: 5,600,000
1) Compute the pre-JIT maintenance cost per unit for each product (round answers to two decimal places).
2) Compute the maintenance cost per unit for each product after installing JIT (round answers to two decimal places).
3) Explain why the JIT maintenance cost per unit is more accurate than the pre-JIT cost.
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