Posted: May 3rd, 2016

Explain why the JIT maintenance cost per roll is more accurate than the cost per roll using the traditional approach?

Input quantities:
Materials (pounds) 1,750 1,900
Labor (hours) 1,400 1,525

Input prices:
Materials (per pound) $3 $4
Labor (per hour) $6 $7

25. By how much did profits change as a result of changes in productivity related to materials?
a. $600 decrease
b. $600 increase
c. $100 decrease
d. $100 increase

SECTION II ()

1. Prior to installing a JIT system, Johnson Company used machine hours to assign maintenance costs to its three products of 4-inch, 6-inch, and 8-inch plastic pipe.

The maintenance costs totaled $540,000 per year. The machine hours used by each product and the quantity produced of each product are as follows:
Machine Hours Quantity Produced
4-inch 10,000 3,750 rolls
6-inch 14,000 4,000 rolls
8-inch 21,000 5,000 rolls

After installing JIT, three manufacturing cells were created, and the cell workers were trained to perform maintenance. Maintenance costs for the three cells still totaled $540,000; however, these costs are now traceable to each cell.
Cell, 4-inch $ 90,000
Cell, 6-inch 160,000
Cell, 8-inch 290,000

Required:
a. Compute the maintenance cost per roll for each type of pipe before JIT is installed.
b. Compute the maintenance cost per roll for each type of pipe after JIT is installed.
c. Explain why the JIT maintenance cost per roll is more accurate than the cost per roll using the traditional approach.