Principles of Cost Accounting
17th Edition
ISBN: 9781305087408
Author: Edward J. Vanderbeck, Maria R. Mitchell
Publisher: Cengage Learning
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Chapter 2, Problem 1MC
Financial and Nonfinancial Aspects of Changing to JIT
IntelliTalk manufactures smart phones. It is considering the implementation of a JIT system. Costs to reconfigure the production line will amount to $200,000 annually. Estimated benefits from the change to JIT are as follows:
- The quality advantages of JIT should reduce current rework cost of $300,000 by 25%.
- Materials storage, handling, and insurance costs of $250,000 would be reduced by an estimated 40%.
- Average inventory is expected to decline by 300,000 units, and the carrying cost per unit is $.35.
Required:
- 1. What is the estimated financial advantage or disadvantage of changing to a JIT system?
- 2. Are there any nonfinancial advantages or disadvantages of changing to a JIT system?
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Decreased waste
$300,000
Increased quality
400,000
Decrease in operating costs
600,000
Increase in on-time deliveries
200,000
The system will cost $9,000,000 and last 10 years. The company's cost of capital is 12 percent.
The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems.
Required:
1. Calculate the payback period for the system.fill in the blank 1 years
Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired?
2. Calculate the NPV and IRR for the project. Round your IRR answers to the nearest whole percentage value (for example, 15.6% rounds to 16% and should be entered as…
A manufacturer of automated optical inspection devices is deciding on a project to increase
the productivity of the manufacturing processes. The estimated costs for the two feasible
alternatives being compared are shown below. Use the internal rate of return (IRR) method to
determine which alternative should be selected if the analysis period is 8 years and the
company's MARR is 4% per year.
Alternative
M
N
Initial costs
$30,000
$45,000
Net annual cash flow
$4,500
$7,000
Life in years
8
8
(a) IRR of base alternative =
(b) IRR of incremental cash flow =
(c) Choose Alternative
Chapter 2 Solutions
Principles of Cost Accounting
Ch. 2 - What are the two major objectives of materials...Ch. 2 - Prob. 2QCh. 2 - What factors should management consider when...Ch. 2 - Prob. 4QCh. 2 - What kind of information and data are needed to...Ch. 2 - How would you define the term economic order...Ch. 2 - What kind of information and data are needed to...Ch. 2 - What factors should be considered when determining...Ch. 2 - Prob. 9QCh. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - Proper authorization is required before orders for...Ch. 2 - Prob. 13QCh. 2 - Prob. 14QCh. 2 - Prob. 15QCh. 2 - Prob. 16QCh. 2 - Prob. 17QCh. 2 - Normally, a manufacturer maintains an accounting...Ch. 2 - Prob. 19QCh. 2 - Why do companies adopt the LIFO method of...Ch. 2 - Prob. 21QCh. 2 - Prob. 22QCh. 2 - Prob. 23QCh. 2 - Prob. 24QCh. 2 - Prob. 25QCh. 2 - Prob. 26QCh. 2 - Prob. 27QCh. 2 - Prob. 28QCh. 2 - A manufacturing process may produce a considerable...Ch. 2 - After a product is inspected, some units may be...Ch. 2 - Order Point Pershing, Inc. expects daily usage of...Ch. 2 - Economic order quantity; order cost; carrying cost...Ch. 2 - Economic order quantity; order cost; carrying cost...Ch. 2 - Journalizing materials requisitions Penrose...Ch. 2 - Recording materials transactions Prepare a journal...Ch. 2 - PurrChems raw materials records contained the...Ch. 2 - Using first-in, first-out perpetual inventory...Ch. 2 - LIFO costing Using last-in, first-out perpetual...Ch. 2 - Using the weighted average method of perpetual...Ch. 2 - Prob. 10ECh. 2 - Renfro, Inc. was franchised on January 1, 2016. At...Ch. 2 - Recording materials transactions Craig Products...Ch. 2 - Recording materials transactions Broadwell...Ch. 2 - JIT and cost control Matsui Industries produces...Ch. 2 - Kenkel, Ltd. uses backflush costing to account for...Ch. 2 - For E2-15, prepare any journal entries that would...Ch. 2 - Davis Co. uses backflush costing to account for...Ch. 2 - For E2-17, prepare any journal entries that would...Ch. 2 - A machine shop manufactures a stainless steel part...Ch. 2 - Spoiled work Roger Company manufactures tennis...Ch. 2 - Defective work Herbert Electronics manufactures an...Ch. 2 - Perry Co. predicts it will use 25,000 units of...Ch. 2 - Prob. 2PCh. 2 - Economic order quantity; tabular computation Lopez...Ch. 2 - In P2-3, assume that the company desires a safety...Ch. 2 - Inventory costing methods The purchases and issues...Ch. 2 - Inventory costing methods The following...Ch. 2 - Terrills Transmissions uses a job order cost...Ch. 2 - Prob. 8PCh. 2 - Tuscany Products, Inc. uses a job order cost...Ch. 2 - Prob. 10PCh. 2 - JIT and cost control Langray, Ltd. produces 50,000...Ch. 2 - Backflush costing Russell Corp. uses backflush...Ch. 2 - Webster Company uses backflush costing to account...Ch. 2 - An examination of Buckhorn Fabricators records...Ch. 2 - One of the tennis rackets that Ace Sporting Goods...Ch. 2 - Lloyd Industries manufactures electrical equipment...Ch. 2 - Review Problem for Chapters 1 and 2 UltraLift...Ch. 2 - Financial and Nonfinancial Aspects of Changing to...Ch. 2 - Prob. 2MC
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