The TieNeck Company manufactures men’s neckwear at its A1 plant. TieNeck is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production:

a. Annual additional tooling costs would be \($280,000.\)

b. Average inventory would decline by 70% from the current level of \($1,500,000.\)

c. Insurance, space, materials-handling and setup costs, which currently total \($300,000\) annually, would decline by 30%.

d. The emphasis on quality inherent in JIT production would reduce rework costs by 20%. TieNeck currently incurs \($200,000\) in annual rework costs.

e. Improved product quality under JIT production would enable TieNeck to raise the price of its product by \($4\) per unit. TieNeck sells 80,000 units each year.

TieNeck’s required rate of return on inventory investment is 20% per year.

1. Calculate the net benefit or cost to TieNeck if it adopts JIT production at the A1 plant.

2. What nonfinancial and qualitative factors should TieNeck consider when making the decision to adopt JIT production?

3. Suppose TieNeck implements JIT production at its A1 plant. Give a few examples of the performance measures that TieNeck could use to evaluate and control JIT production. What would be the benefit of TieNeck implementing an enterprise resource planning (ERP) system?