Question

JIT Features and Product Costing Accuracy Prior to installing a JIT system, Barker Company, a producer of automobile parts, used maintenance hours to assign maintenance costs to its three products (wheels, brake pads, and ball bearings). The maintenance costs totaled $7,263,620 per year. The maintenance hours used by each product and the quantity of each product produced are as follows: Maintenance Hours Quantity Produced Wheels 197,000 172,375 Pads 197,000 172,375 Bearings 220,000 192,500 After installing IT, three manufacturing cells were created, and cell workers were trained to perform preventive maintenance and minor repairs. A full-time maintenance person was also assigned to each cell. Maintenance costs for the three cells still totaled $7,263,620; however, these costs are now traceable to each cell as follows: Cell, wheels $2,152,210 Cell, pads 2,330,510 2,780,900 Cell, bearings

Answer 1

Cost per machine hour (Total manitenance cost/Total machine hours) Cost per machine hour (7263620/(197000+197000+220000)) Cost per machine hour = S 11.83/. Pre-JIT maintenance cost per unit for each product: (11.83 197000)/172375 S 13.52/. (11.83 197000)/172375 $ 13.52/. Wheels Pads Bearings (11.83*220000)/192500 = $ 13.52/. Maintenance cost per unit for each product after installing JIT :- Wheels (2152210/172375) S 12.49/. (Rounded to two decimals) Pads (2330510/172375) 13.52/. (2780900/192500) = $ 14.45/. (Rounded to two decimals) Bearings