1. 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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Homer Manufacturing produces different models of 22-calibre rifles. The manufacturing costs assigned to its economy model rifle before and after
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 job-order costing system to a process-costing system. 

                                                    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

Depreciation                               12.500                     10.000

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:

1. 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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