Prior to Installing a JIT System,Johnson Company Used Machine Hours

question 46

Essay

Prior to installing a JIT system,Johnson Company used machine hours to assign maintenance costs to its three products of 4-cm,6-cm,and 8-cm plastic pipe.
The maintenance costs totalled $540,000 per year.The machine hours used by each product and the quantity produced of each product are as follows:
$\begin{array}{lll}&\text { Machine Hours }&\text {Quantity Produced }\\4 \mathrm{~cm} & 10,000 & 3,750 \mathrm{rolls} \\6 \mathrm{~cm} & 14,000 & 4,000 \mathrm{rolls} \\8 \mathrm{~cm} & 21.000 & 5,000 \mathrm{rolls}\end{array}$ After installing JIT,three manufacturing cells were created,and the cell workers were trained to perform maintenance.Maintenance costs for the three cells still totalled $540,000; however,these costs are now traceable to each cell.
$\begin{array}{lr}\text { Cell, } 4 \mathrm{~cm} & \$ 90,000 \\\text { Cell, } 6 \mathrm{~cm} & 160,000 \\\text { Cell } 8 \mathrm{~cm} & 290,000\end{array}$
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.

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Definitions:

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