Prior to Installing a JIT System, Clark Company Used Machine

question 64

Multiple Choice

Prior to installing a JIT system, Clark Company used machine hours to assign maintenance costs to its three products of 4-cm, 6-cm, and 9-cm insulation. The maintenance costs totalled $400,000 per year. The machine hours used by each product and the quantity produced of each product are as follows:
$\begin{array}{lcc} &\underline{\text {Machine Hours}}& \underline{\text {Quantity Produced}}\\4 \mathrm{~cm} & 12,000 & 31,250 \mathrm{rolls} \\6 \mathrm{~cm} &20,000 & 25,000 \mathrm{rolls} \\9 \mathrm{~cm} & 18,000 &12,000 \mathrm{rolls}\end{array}$ 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 $400,000; however,these costs are now traceable to each cell.
$$\begin{array} { c r } \text { Cell } 4 \mathrm {~cm} & \$ 100,000 \\\text { Cell, } 6 \mathrm {~cm} & 120,000 \\\text { Cell } 9 \mathrm {~cm} & 180,000\end{array}$$
-Refer to the figure.What would be the maintenance cost per roll of 4-cm insulation after installing JIT?

• A)$1.28
• B)$2.56
• C)$2.84
• D)$3.20

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Definitions:

Cash Flow

The net amount of cash and cash-equivalents being transferred into and out of a business, reflecting its operational, investing, and financing activities.

Total Assets Ratio

A financial metric used to evaluate a company's financial health by comparing its total assets to its total liabilities.

Operating Cash Flows

Cash generated or used through a company's main business operations.

Noncash Investing

Transactions that involve the acquisition or disposal of long-term assets without the immediate use of cash, often reflected in the investing activities section of the cash flow statement.