Prior to Installing a JIT System, Reilly Company Used Machine

question 37

Multiple Choice

Prior to installing a JIT system, Reilly 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 $420,000 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 $420,000; however, these costs are now traceable to each cell.
The maintenance cost per roll of 4-inch insulation before JIT is installed would be

• A) $12.00.
• B) $8.75.
• C) $7.00.
• D) $6.58.

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Definitions:

Mixed Cost

An expense that contains both variable and fixed cost components, changing in total with the level of activity but also containing a constant element.

Straight-Line Depreciation

A method used in accounting to allocate the cost of a tangible asset over its useful life evenly.

Electricity Costs

The financial charges for the consumption of electrical energy by a business, forming part of its operating expenses.

Factory Supervisor

A managerial position responsible for overseeing the daily operations of a manufacturing facility, ensuring production targets are met efficiently.