Homer Manufacturing produces different models of .22-caliber rifles. The manufacturing costs assigned to its economy model rifle
Question:
In both the pre- and post-JIT setting, 10,000 units of the economy model are manufactured.
In the JIT setting, manufacturing cells are used to produce each product. The management of Homer Manufacturing reported a significant decrease in manufacturing costs for all of its rifles after JIT was installed. It also reported less inventory-related costs and a significant decrease in lead times. Accounting costs also decreased because Homer switched from a job-order costing system to a process-costing system.
Required:
1. Compute the unit cost of the product before and after JIT.
2. Explain why the JIT unit cost is more accurate. Also explain what JIT features may have produced a decrease in production costs. Use as many specific cost items as possible to illustrate your explanation.
3. Explain why Homer Manufacturing switched from a job-order costing system to a process-costing system after JIT was implemented.
4. Classify the costs in the JIT environment according to how they are assigned to the cell: direct tracing, driver tracing, or allocation. Which cost assignment method is most common? What does this imply regarding product costing accuracy?
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Related Book For
Cost Management Accounting and Control
ISBN: 978-0324559675
6th Edition
Authors: Don R. Hansen, Maryanne M. Mowen, Liming Guan
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