Prior to Installing a JIT System, Clarendon Company Used Machine

question 88

Multiple Choice

Prior to installing a JIT system, Clarendon Company used machine hours to assign maintenance costs to its three products of 6-inch, 8-inch, and 11-inch insulation. The maintenance costs totaled $400,000 per year. The machine hours used by each product and the quantity produced of each product are as follows: 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 $400,000; however, these costs are now traceable to each cell.
After installing JIT, the maintenance cost per roll of 6-inch insulation would be

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

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Definitions:

Accounts Receivable

Funds that clients or customers have yet to pay to a company for products or services already provided.

Accounts Payable

Obligations a company has to pay back to lenders for products and services bought on credit.

Salary Expense

The total amount paid to employees for services rendered during a specific period before any deductions are made.

Fees Earned

Revenue generated from services provided.