Posted: April 30th, 2016

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

24. What is the partial operational productivity measure for materials for 2010?
a. 3.2000
b. 3.2500
c. 0.3077
d. 0.3125

Information about Cheng Corporation is as follows:
2009 2010
Output (units) 14,000 15,000
Selling price per unit $16 $16

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.

2. Gibson, Inc., has developed ideal standards for four activities: labor, materials, inspection, and receiving.

Information is as follows:

Activity Activity Driver SQ AQ SP
Labor Hours 500 550 $ 32
Materials Pounds 2,000 2,500 48
Inspection Inspection hours 0 375 22
Receiving Orders 60 75 800