Prior to Installing a JIT System, Grindstone Company Used Machine

question 43

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: After installing JIT, three manufacturing cells were created and the cell workers were trained to performmaintenance. Maintenance costs for the three cells still totaled $432,000; however, these costs are now traceable to each cell.

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

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Definitions:

Creditor

An entity or person to whom money is owed by the business.

Department Manager

An individual responsible for overseeing a specific department's operations, budget, and staff within an organization.

Direct Material

Raw materials that can be directly attributed to the production of a specific product, part of the variable costs of manufacturing.

Manufacturing Overhead

Manufacturing overhead encompasses all the indirect costs associated with producing goods, such as utilities, depreciation, and salaries of support staff, that cannot be directly traced to specific products.