Prior to Installing a JIT System, PVCTec Company Used Machine

question 137

Essay

Prior to installing a JIT system, PVCTec Company used machine hours to assign maintenance costs to its three products of 9-inch, 11-inch, and 13-inch plastic pipe.
The maintenance costs totaled $540,000 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 $540,000; however, these costs are now traceable to each cell.
Required:
a. Compute the maintenance cost per roll for each type of PVC pipe before JIT is installed.
b. Compute the maintenance cost per roll for each type of PVC 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:

Distribution Centers

Facilities that store and distribute products or goods to retailers or end consumers, playing a key role in the supply chain.

Layout Strategy

The plan and methodology behind organizing physical space, machinery, and operations in an efficient and productive manner in a facility.

Competitive Requirements

The essential conditions or capabilities that a company must meet or exceed to effectively compete in a given market.

Retail Layout

An approach that addresses flow, allocates space, and responds to customer behaviour.