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 $4,788,000 per year. The maintenance hours used by each product and the quantity of each product produced are as follows:

	Maintenance Hours	Quantity Produced
Wheels	186,000	162,750
Pads	186,000	162,750
Bearings	228,000	199,500

After installing JIT, 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 $4,788,000; however, these costs are now traceable to each cell as follows:

Cell, wheels	$1,333,980
Cell, pads	1,484,280
Cell, bearings	1,969,740

Required:

1. Compute the pre-JIT maintenance cost per unit for each product. If required, round your answers to the nearest cent.

Wheels	$ per unit
Pads	$ per unit
Bearings	$ per unit

2. Compute the maintenance cost per unit for each product after installing JIT. If required, round your answers to the nearest cent.

Wheels	$ per unit
Pads	$ per unit
Bearings	$ per unit

Answer 1

Answer:-1)-Pre JIT maintenance cost Allocation on the basis of Maintenance hours:-

Wheels =($4788000*186000 hours)/600000 hours =$1484280

Pads    =($4788000*186000 hours)/600000 hours =$1484280

Bearings =($4788000*228000 hours)/600000 hours =$1819440

Pre JIT maintenance cost per unit:-

Wheels =$1484280/162750 units =$9.12 per unit

Pads    =$1484280/162750 units =$9.12 per unit

Bearings =$1819440/199500 units =$9.12 per unit

2)-Maintenance cost per unit after installing JIT:-

Cell Wheels =$1333980/162750 units =$8.20 per unit

Cell Pads    =$1484280/162750 units =$9.12 per unit

Cell Bearings =$1969740/199500 units =$9.87 per unit