Prior to Installing a JIT System, Clarendon Company Used Machine

question 19

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.
Cell, 6-inch $100,000
Cell, 8-inch 120,000
Cell, 11-inch 180,000
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:

Debt Financing

Raising capital through borrowing money that must be repaid over time, with interest, typically through loans or the issuance of bonds.

Sound Financial Foundation

A stable and healthy financial status characterized by manageable debt levels, strong cash flow, and sufficient reserves for future needs.

Debt Worthy

A term indicating an individual or organization's capability and reliability in repaying borrowed money, often assessed by creditworthiness.

Expansion Capital

Refers to the funds provided to mature companies looking to expand operations, enter new markets, or acquire assets without changing control of the business.