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15) Factors that are relevant in a JIT system, but not for the EOQ model, include A) quality of…

by | Sep 9, 2023 | accounting


15) Factors that are relevant in a JIT system, but not for the EOQ model, include

A) quality of materials.

B) timeliness of deliveries.

C) stockout costs.

D) carrying costs.

E) quality of materials, timeliness of deliveries, and stockout costs.


16) Primary components that manufacturers would use to evaluate suppliers under a just-in-time system would include all of the following EXCEPT

A) on-time delivery.

B) production lead time.

C) purchase price.

D) quality costs.

E) long-term partnerships.


17) The Jarvis Corporation produces bucket loader assemblies for the tractor industry. The product has a long term life expectancy. Jarvis has a traditional manufacturing and inventory system. Jarvis is considering the installation of a just-in-time inventory system to improve its cost structure. In doing a full study using its manufacturing engineering team as well as consulting with industry JIT experts and the main vendors and suppliers of the components Jarvis uses to manufacture the bucket loader assemblies, the following incremental cost-benefit relevant information is available for analysis:


The Jarvis cost of investment capital hurdle rate is 15%.

One time cost to rearrange the shop floor to create the manufacturing cell workstations is $275,000.

One time cost to retrain the existing workforce for the JIT required skills is $60,000.

Anticipated defect reduction is 40%. Currently there is a cost of quality defect assessment listed as $150,000 per year.

The setup time for each of the existing functions will be reduced by 67%. Currently the forecast for setup costs are $225,000 per year.

Jarvis will expect to save $200,000 per year in carrying costs as a result of having a lower inventory.


The suppliers will require a 15% premium over the current level of prices in order to position themselves to supply the material on a smaller and more frequent schedule. Currently the materials purchases are $1,500,000 per year.



Determine whether it is in the best interest of Jarvis Corporation to install a JIT system.

18) The manufacturing manager of New Technology Company is concerned about the company's newest plant. When the plant began operations three years ago it had the best of everything. It had modern equipment, well-trained employees, engineered work and assembly stations and a controlled environment. During the first two years the evaluation results were very good with almost all cost variances being favourable. However, recently things have turned negative.


In recent months everything seems to be operating in a crisis management mode. Although most cost variances remain favourable, the plant's segment contribution is declining and customers are complaining about poor quality and slow delivery. Several customers have suggested that they may take their business elsewhere if things do not improve.


The shop floor is in continual turmoil. In-process inventory is everywhere, production employees have difficulty finding jobs that need to be worked on, and scheduling has requested a larger computer to keep track of work in process.


The vice president of sales does not know where to begin with solving the customers' problems. It seems that everyone is working very hard and the plant has the best facilities and trained employees in the industry.



What is the nature of the plant's problems? What recommendation would you make to help improve the situation?





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