Playthings, a toy manufacturer specializing in toys for toddlers, is considering switching to a JIT manufacturing process. The CEO has been talking with the production consultants, who tell her that a new philosophy must be embraced: If a defective part of an out-of-control process is detected, no more units should be made until the process is corrected. The consultants estimate that the production process may occasionally be shut down anywhere from 30 minutes to 7 hours. Discuss the advantages and disadvantages of such a system.
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Playthings, a toy manufacturer specializing in toys for toddlers, is considering switching to a JIT manufacturing process. The CEO has been talking with the production consultants, who tell her that a new philosophy must be embraced: If a defective part of an out-of-control process is detected, no more units should be made until the process is corrected. The consultants estimate that the production process may occasionally be shut down anywhere from 30 minutes to 7 hours. Discuss the advantages and disadvantages of such a system.
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- Richins Company is considering the acquisition of a computerized manufacturing system. The new system has a built in quality function that increases the control over product specifications. An alarm sounds whenever the product falls outside the programmed specifications. An operator can then make some adjustments on the spot to restore the desired product quality. The system is expected to decrease the number of units scrapped because of poor quality. The system is also expected to decrease the amount of labor inputs needed. The production manager is pushing for the aquisition because he believes that productivity will be greatly enhanced - particularly when it comes to labor and material inputs. Output and input data follow. The data for the computerized system are projections. Current System Computerized System Output (units)…The chief executive officer (CEO) of Cobalt Inc. just read an article written by a business professor at Harvard University describing the benefits of the lean philosophy. The CEO issued the following statement after reading the article: This company will become a lean manufacturing company. Presently, we have too much inventory. To become lean, we need to eliminate the excess inventory. Therefore, I want all employees to begin reducing inventories until we make products “just in time. ” Thank you for your cooperation. How would you respond to the CEO’s statement?Johnson Limited is contemplating the installation of a new system that would allow for automated handling of customer inquiries about their order status, account balances, etc. Currently all such inquiries are handled manually by customer service representatives. The software for the new system would cost $214,000. An additional $169,000 would be required for one-time installation costs. Management estimates that the new system would result in costs of $10,300 per year related to addressing software issues and other technological problems that may arise. However, the new system is expected to reduce labour costs by $65,000 per year. Management estimates that the system would be used for five years. Severance costs related to the employees that would be laid off after implementing the new system would be $22,600. Johnson Limited requires a return of at least 15% on investments of this type. Required: Ignore income taxes. 1. Compute the net annual cost savings promised by the new system.…
- Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…
- Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…Thai manufacturing Inc. began operations five years ago producing a new diagnostic instrument, it hoped to sell to doctors, dentists, and hospitals. The demand for the instrument far exceeded initial expectations, and the company was unable to produce enough of the instrument to meet the demand. Thai was manufacturing the instrument using equipment it built at the start of the operations, but it needed more efficient equipment to meet demand. Company management decided to design and build the equipment, because no equipment currently available on the market was suitable for producing the instrument. In 2018, a section of the plant was devoted to development of the new equipment and a special staff of personnel was hired. Within six months, a machine was developed at a cost of $170,000 that increased production and reduced labour cost substantially. Sparked by the success of the new machine, the company built three more machines of the same type at a cost of $80,000 each. Required: 1)…Thai manufacturing Inc. began operations five years ago producing a new diagnostic instrument, it hoped to sell to doctors, dentists, and hospitals. The demand for the instrument far exceeded initial expectations, and the company was unable to produce enough of the instrument to meet the demand. Thai was manufacturing the instrument using equipment itbuilt at the start of the operations, but it needed more efficient equipment to meet demand.Company management decided to design and build the equipment, because no equipment currently available on the market was suitable for producing the instrument.In 2018, a section of the plant was devoted to development of the new equipment and a special staff of personnel was hired. Within six months, a machine was developed at a cost of $170,000 that increased production and reduced labour cost substantially. Sparked by the success of thenew machine, the company built three more machines of the same type at a cost of $80,000 each.Required:1) In…
- “That old equipment for producing carburetors is worn out,” said Bill Seebach, president of Hondrich Company. “We need to make a decision quickly.” The company is trying to decide whether it should rent new equipment and continue to make its carburetors internally or whether it should discontinue production of its carburetors and purchase them from an outside supplier. The alternatives follow: Alternative 1: Rent new equipment for producing the carburetors for $189,000 per year. Alternative 2: Purchase carburetors from an outside supplier for $20.25 each. Hondrich Company’s costs per unit of producing the carburetors internally (with the old equipment) are given below. These costs are based on a current activity level of 30,000 units per year: Direct materials $ 5.70 Direct labour 8.00 Variable overhead 2.40 Fixed overhead ($3.15 supervision, $1.80 depreciation, and $4.00 general company overhead) 8.95 Total cost per…Kagle design engineers are in the process of developing a new “green” product, one that will significantly reduce impact on the environment and yet still provide the desired customer functionality. Currently, two designs are being considered. The manager of Kagle has told the engineers that the cost for the new product cannot exceed $550 per unit (target cost). In the past, the Cost Accounting Department has given estimated costs using a unit-based system. At the request of the Engineering Department, Cost Accounting is providing both unit- and activity-based accounting information (made possible by a recent pilot study producing the activity-based data). Unit-based system:Variable conversion activity rate: $100 per direct labor hourMaterial usage rate: $20 per partABC system:Labor usage: $15 per direct labor hourMaterial usage (direct materials): $20 per partMachining: $75 per machine hourPurchasing activity: $150 per purchase orderSetup activity: $3,000 per setup hourWarranty…Dixie Irwin is the department manager for Religious Books, a manufacturer of religious books that are sold through Internet companies. Irwin’s bonus is based on reducing production costs. Irwin has identified a supplier, Cheap Paper, that can provide paper products at a 10% cost reduction. The paper quality is not the same as that of the current paper used in production. If Irwin uses the supplier, she will certainly achieve her personal bonus goals; however, other company goals may be in jeopardy. What is the ethical issue? Identify the key performance issues at risk, and recommend a plan of action for Irwin.