Quality cost categories Of the four quality costing categories, which quality cost is the most damaging to the organization? Explain. 7 30 JIT manufacturing and cost savings Boris Company introduced JIT manufacturing last year and has prepared the following data to assess the benefits from the change:
|
CATEGORY |
BEFORE THE CHANGE |
AFTER THE CHANGE |
|
Production cycle time |
50 days |
25 days |
|
Inventories |
$220,000 |
$40,000 |
|
Total sales |
$1,000,000 |
$1,500,000 |
|
Costs as percent of sales: |
|
|
|
Direct materials |
25% |
20% |
|
Direct labor |
20% |
15% |
|
Support |
27% |
17% |
Inventory financing costs are 12% per year. Support costs are based on a time driven activity based costing analysis. Estimate the total financial benefits that resulted from the switch to JIT manufacturing operations.