1. Classify the costs in the JIT environment according to how they are assigned to the cell: direct tracing, driver tracing, or Which cost assignment method is most common? What does this imply regarding product-costing accuracy?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Homer Manufacturing produces different models of 22-calibre rifles. The
installing JIT are given in the following table. Cell workers do all maintenance and are also responsible for moving materials, cell janitorial work, and inspecting products. Janitorial work outside the cells is still handled by the Janitorial Department. 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
Before After
Direct Material 60.000 55.000
Direct labor 40.000 50.000
Maintenance 50.000 30.000
Inspection 30.000 10.000
Rework 60.000 9.000
Power 10.000 6.000
Depreciation 12.500 10.000
Material Handlings 8.000 2.000
Engineering 80.000 50.000
Setups 15.000 0
Janitorial 40.000 20.000
Building and grounds 11.800 12.400
Supplies 4.000 3.000
Supervision (plant) 10.000 8.000
Cell Supervision - 35.000
Cost Accounting 40.000 25.000
Departmental supervision 18.000 -
489.300 325.400
Required:
1. Classify the costs in the JIT environment according to how they are assigned to the cell: direct tracing, driver tracing, or Which cost assignment method is most common? What does this imply regarding product-costing accuracy?
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