Prior to Installing a JIT System, Grindstone Company Used Machine

question 47

Multiple Choice

Prior to installing a JIT system, Grindstone Company used machine hours to assign maintenance costs to its three products of 4-inch, 6-inch, and 9-inch insulation. The maintenance costs totaled $432,000 per year. The machine hours used by each product and the quantity produced of each product are as follows: $$\begin{array} { r r r } & \text { Machine Hours } & \text { Quantity Produced } \\4 \text {-inch } & 5,000 & 15,000 \text { rolls } \\6 \text {-inch } & 12,000 & 12,500 \text { rolls } \\9 \text {-inch } & 7,000 & 11,200 \text { rolls }\end{array}$$
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 $432,000; however, these costs are now traceable to each cell.
$\begin{array}{lr}\text { Cell, 4-inch } & \$ 125,000 \\\text { Cell, 6-inch } & 175,000 \\\text { Cell, 9-inch } & 165,000\end{array}$
After installing JIT, the maintenance cost per roll of 6-inch insulation is

• A)$8.67.
• B)$12.85.
• C)$14.00.
• D)$17.00.

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Definitions:

Ledger

A comprehensive record of all financial transactions that occur in a business, serving as the principal book for accounting and analysis.

Chart of Accounts

A systematic list of all account titles and numbers being used by a company to organize its financial transactions and to prepare financial statements.