Reference no: EM133123566

Question - Harris Hardware Ltd manufactures security screens at its Borallon plant. Harris Hardware is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production. The required rate of return is 10%.

a. Annual additional tooling costs would be $178,000.

b. Average inventory would decline by 83% from the current level of $729,000.

c. Insurance, space, material-handling and setup costs, which currently total $278,000 annually, would decline by 16%.

d. The emphasis on quality inherent in JIT production would reduce rework costs by 35%. Harris Hardware currently incurs $207,000 in annual rework costs.

e. Improved product quality under JIT production would enable Harris Hardware to raise the price of its product by $4 per unit. Harris Hardware sells 43,000 units each year.

f. Harris Hardware's required rate of return on inventory investment is 10% per year.

Required - Calculate and enter the net benefit or cost (show negative) to Harris Hardware if it adopts JIT production on the Borallon plant?