Assignment 5
Sidra Umar Qureshi
Section D 18U00118
Mini Case No.1
1. There is definitely a financial advantage of changing to a JIT system.
Reduction in current rework cost (300000*25%) ------------------------------------ 75000
Reduction in materials storage, handling costs etc. (250000*40%) --------------100,000
Reduction in carrying costs (300000*0.35) ---------------------------------------------105,000
Total savings------------------------------------------------------------------------------------280, 0000
Less: Increased changeover costs---------------------------------------------------------- (200,000)
Net Advantage of JIT -------------------------------------------------------------------------- 80,000
2. Non-financial advantages:
a. JIT can help improve the product quality
b. The factory space can be freed up and it can be utilized for other uses or operations.
Non-financial disadvantages:
a. There can be an interruption in materials supply or their workers can go on a strike thus
resulting in sales being lost.
b. Workers can find it difficult to adapt to the JIT processes.
Mini Case No.2
1.
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Inventory carrying costs i.e. security, storage space for raw material, spoilage all such
costs can be reduced by JIT system.
It can also reduce the nonvalue added production activities i.e. work in process, moving
materials.
Storage of the work in process and finished goods can be reduced.
The inspection of work in process can also be reduced.
2.Benefits to customers:
 Quicker delivery therefore increased customer satisfaction
 Decreased product costs as savings in carrying costs
 Quality control techniques of JIT helping in improvement of product quality.
3. Yes Votto will have to make changes to the way inventory is accounted. It should not be
accounted using the old job costing techniques. A few accounts such as Raw and In-Process
accounts may replace or takeover some existing accounts such as a materials account, others
such as WIP and finished goods may dissapear.