Fifteen years ago, Bryce Stabele, together with several financial supporters, founded SA Corporation. Located in Atlanta, the company originally manufactured roller skates, but 12 years ago, on the advice of its marketing department, it switched to making skateboards. More than 4 million skateboards later, SA Corporation finds itself an industry leader in both volume and quality. To retain market share, it has decided to automate its manufacturing process. It has ordered flexible manufacturing systems for wheel assembly and board shaping. Manual operations will be retained for board decorating because some hand painting is involved. All operations will be converted to a JIT environment.
Bryce wants to know how the JIT approach will affect the company’s product costing practices and has called you in as a consultant.
1. Summarize the elements of a JIT environment.
2. How will the automated systems change product costing?
3. What are some cost drivers that the company should employ? In what situations should it employ them?