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Consider the following characteristics of either a JIT production system or a traditional production system. Indicate whether each is characteristic of a JIT production system or a traditional production system.

a. Products are produced in large batches.

b. Large stocks of finished goods protect against lost sales if customer demand ishigher than expected.

c. Suppliers make frequent deliveries of small quantities of raw materials.

d. Employees do a variety of jobs, including maintenance and setups as well as operating machines.

e. Machines are grouped into self-contained production cells or production lines.

f. Machines are grouped according to function. For example, all cutting machines are located in one area.

g. The final operation in the production sequence “pulls” parts from the preceding operation.

h. Each employee is responsible for inspecting his or her own work.

i. Management works with suppliers to ensure defect-free raw materials.

Short Answer

Expert verified

Activity (a), (b), (f), (g) are part of the traditional production system and all other activities are part of the JIT production system.

Step by step solution

01

JIT Production system

Just-in-time production system is a type of management system that minimizes the material, labor, and time in the production process. In comparison to the traditional production system, the JIT system does not work in different departments. In the JIT system, a work cell is created that provides all needed facilities to produce goods.

The production is done in small batches in the PJIT system and the inventories instead of storing them are procured as and when required.

02

Classifying activity into JIT or traditional system

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Most popular questions from this chapter

Harcourt Pharmaceuticals manufactures an over-the-counter allergy medication. The company sells both large commercial containers of 1,000 capsules to health care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. The following information has been developed to determine if an activity-based costing system would be beneficial:

Activity Estimated Estimated Quantity

Indirect Cost Allocation Base of Allocation Base

Materials handling \( 96,000 Number of kilos 24,000 kilos

Packaging 210,000 Number of machine hours 3,000 hours

Quality assurance 114,000 Number of samples 1,900 samples

Total indirect costs \) 420,000

Other production information includes the following:

Commercial Containers Travel Packs

Units produced 2,800 containers 51,000 packs

Weight in kilos 9,800 5,100

Machine hours 1,960 510

Number of samples 560 765

Requirements

4. Compare the indirect activity-based costs per unit to the indirect costs per unit from the traditional system. How have the unit costs changed? Explain why the costs changed as they did.

Koehler (see Exercise E19-15 and Exercise E19-16) makes handheld calculators in two models—basic and professional—and wants to further refine its costing system by allocating overhead using activity-based costing. The estimated \(721,000 of manufacturing overhead has been divided into three primary activities: Materials Handling, Machine Setup, and Insertion of Parts. The following data have been compiled:

Material Handling

Machine Setup

Insertion of Parts

Total

Overhead costs

\) 45,000

\( 136,000

\) 540,000

$ 721,000

Allocation base

Number of parts

Number of setups

Number of parts

Expected usage:

Basic Model

32 parts per calculator

24 setups per year

32 parts per calculator

Professional

Model

58 parts per calculator

44 setups per year

58 parts per calculator

Requirement 2

Compare your answers for Exercise E19-15, Exercise E19-16, and Exercise E19-17. What conclusions can you draw?

Question:The Santos Shirt Company manufactures shirts in two departments: Cutting and Sewing. The company allocates manufacturing overhead using a single plantwide rate with direct labor hours as the allocation base. Estimated overhead costs for the year are\(500,000, and estimated direct labor hours are 200,000. In June, the company incurred 17,500 direct labor hours.

1. Compute the predetermined overhead allocation rate.

2. Determine the amount of overhead allocated in June.

The Santos Shirt Company has refined its allocation system by separating manufacturing overhead costs into two cost pools—one for each department. The estimated costs for the Cutting Department are \)200,000. They will be allocated based on directlabor hours, which are estimated to be 125,000 hours for the year. The estimated costs for the Sewing Department are $300,000.Those costs will be allocated based on machine hours, which are estimated to be 150,000 hours for the year. In June, the companyincurred 10,000 direct labor hours in Cutting and 12,500 machine hours in Sewing.

3. Compute the predetermined overhead allocation rates for each department.

4. Determine the total amount of overhead allocated in June.

Question:Oscar, Inc. manufactures bookcases and uses an activity-based costing system. Oscar’s activity areas and related data follow:

Activity

Budgeted Cost of Activity

Allocation Base

Predetermined Overhead Allocation Rate

Materials handling

\( 240,000

Number of parts

\)1.00

Assembly

3,500,000

Number of assembling direct labor hours

17.00

Finishing

190,000

Number of finished units*

4.50

*Refers to number of units receiving the finishing activity, not the number of units transferred to Finished Goods Inventory

Oscar produced two styles of bookcases in October: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs, and other data follow:

Product

Total Units Produced

Total Direct materials Costs

Total Direct Labor Costs

Total Number of Parts

Total Assembling Direct Labor Hours

Standard bookcase

7,000

\(91,000

\)105,000

28,000

10,500

Unfinished bookcase

7,500

82,500

75,000

22,500

7,500

Requirements

1. Compute the manufacturing product cost per unit of each type of bookcase.

Question:Newton Company has analyzed its production process and identified two primary activities. These activities, their allocation bases, and their estimated costs are listed below.

Activity

Allocation Base

Estimated Activity

Estimated Costs

Purchasing

Number of purchase orders

200 purchase orders

\( 10,000

Materials Handling

Number of parts

15,000 parts

\) 7,500

The company manufactures two products: Regular and Super. The products use the following resources in March:

Regular Super

Number of purchase orders 5 purchase orders 7 purchase orders

Number of parts 600 parts 750 parts

5. Compute the predetermined overhead allocation rates using activity-based costing.

6. Determine the amount of overhead allocated to Regular products in March.

7. Determine the amount of overhead allocated to Super products in March.

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