Financial and Nonfinancial Aspects of Changing to JIT IntelliTalk manufactures smart phones. It is considering the implementation of a JIT system.
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Financial and Nonfinancial Aspects of Changing to JIT

IntelliTalk manufactures smart phones. It is

considering the implementation of a JIT system. Costs to reconfigure the production line will amount to $200,000 annually. Estimated benefits from the change to JIT are as follows:


*The quality advantages of JIT should reduce current rework cost of $300,000 by 25%.

*Materials storage, handling, and insurance costs of $250,000 would be reduced by an estimated 40%.

*Average inventory is expected to decline by 300,000 units, and the carrying cost per unit is $.35.



Required:

1.) What is the estimated financial advantage or disadvantage of changing to a JIT system?

2.) Are there any nonfinancial advantages or disadvantages of changing to a JIT system?

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