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Chapter 19: Q19-14RQ (page 1063)

What is a just-in-time management system?

Short Answer

Expert verified

Just-in-time is a manufacturing system that focuses on reducing waste by procuring inventory as and when needed.

Step by step solution

01

Just-in-time management system

Just-in-time management system is a modern manufacturing system in which goods are produced on demand. In comparison to the traditional manufacturing system just in time manufacturing system reduces inventory cost, reduces wastage, and delivers finished goods to the customers just in time.

02

How the JIT Management system works

Under JIT management system, manufacturers contract with the supplier for procuring raw materials frequently in small quantities. The inventories are ordered when the demand comes for production. Thus there is no storage cost under JIT. Due to small quantities, there are also reduced wastage costs. The finished goods inventory under JIT is kept to a minimal amount.

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Most popular questions from this chapter

PetSmart, Inc. is a large specialty pet retailer of services and solutions for the needs of pets. In addition to selling pet food and pet products, PetSmart also offers dog grooming services including bath, nail trim, teeth brushing, aromatherapy to reduce everyday stress, and nail polish and stickers. PetSmart even offers a Top Dog service that includes a premium shampoo, milk bath conditioner, scented cologne spritz, teeth brushing, and bandana or bow.

Assume PetSmart, Inc. expects to incur \(380,000 of indirect costs this year. The company allocates indirect costs based on the following activities:

___________________________________________________________________

Activity Estimated Allocation Base Estimated Quantity

Cost of Allocation

Base____

Admission \) 60,000 Number of admissions 20,000

Cleaning 240,000 Cleaning direct labor hours 100,000

Grooming 80,000 Grooming direct labor hours 4,000

Total indirect costs \( 380,000________________________________________

Requirements.

2. Assume a customer brought in Sophie, a beagle, for Top Dog service. PetSmart used the following resources:

_____________________________________________

Allocation Base Sophie, Beagle

Number of admissions 1

Cleaning direct labor hours 1

Grooming direct labor hours 0.5______

Determine the total cost of the Top Dog service for Sophie assuming the total direct materials cost was \)3.50 and the total direct labor cost was $12 per DLHr.

Darby Corp. is considering the use of activity-based costing. The following information is provided for the production of two product lines:

Activity Cost Allocation Base

Setup \( 105,000 Number of setups

Machine maintenance 60,000 Number of machine hours

Total indirect manufacturing costs \) 165,000

Product A Product B Total

Direct labor hours 7,000 5,000 12,000

Number of setups 30 170 200

Number of machine hours 1,600 2,400 4,000

Darby plans to produce 375 units of Product A and 250 units of Product B. Compute the ABC indirect manufacturing cost per unit for each product.

“Prevention is much cheaper than external failure.” Do you agree with this statement? Why or why not?

Willitte Pharmaceuticals manufactures an over-the-counter allergy medication. The company sells both large commercial containers of 1,000 capsules to health care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. The following information has been developed to determine if an activity-based costing system would be beneficial:

Activity Estimated Estimated Quantity

Indirect Cost Allocation Base of Allocation Base

Materials handling \( 95,000 Number of kilos 19,000 kilos

Packaging 200,000 Number of machine hours 5,000 hours

Quality assurance 112,500 Number of samples 1,875 samples

Total indirect costs \) 407,500

Actual production information includes the following:

Commercial Containers Travel Packs

Units produced 2,400 containers 50,000 packs

Weight in kilos 9,600 5,000

Machine hours 1,680 500

Number of samples 240 750

Requirements

4. Compare the indirect activity-based costs per unit to the indirect costs per unit from the traditional system. How have the unit costs changed? Explain why the costs changed.

Refer to Exercise E19-20. For 2019, Eason’s managers have decided to use the same indirect manufacturing costs per wheel rim that they computed in 2018 using activity based costing. In addition to the unit indirect manufacturing costs, the following data are expected for the company’s standard and deluxe models for 2019:

Standard Deluxe

Sales price \( 800.00 \) 940.00

Direct materials 31.00 48.00

Direct labor 45.00 52.00

Because of limited machine hour capacity, Eason can produce either2,000 standard rims or2,000 deluxe rims.

Requirements

1. If Eason’s managers rely on the ABC unit cost data computed in Exercise E19-20, which model will they produce? Carry each cost to the nearest cent. (Ignore selling and administrative expenses for this calculation.)
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