Reference no: EM13914825
Total Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75% but would require a greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, John Chan, is opposed to the idea of a new JIT system. He is concerned that the new system will be too costly to manage, will result in too many stock outs, and 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 plant controller, Stephen Li, is in favour of the new system, due to the likely cost savings. John wants Stephen 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 morale. In addition to the reduction in inventory described previously, Stephen has gathered the following information for the upcoming year regarding the JIT system:
• Annual insurance and warehousing costs for inventory would be reduced by 60% of the current budgeted level of $350,000.
• Payroll expenses for current inventory management staff would be reduced by 15% of the budgeted total of $600,000.Additional annual costs for JIT system implementation and management, including personnel costs, would equal $220,000.
• The additional number of stock outs under the new JIT system is estimated to be 5% of the total number of shipments annually. 10,000 shipments are budgeted for the upcoming year. Each stock out would result in an average additional cost of $250.
• Total’s required rate of return on inventory investment is 10% per year.
Required:
a) From a financial perspective, advise whether Total Corporation should adopt the new JIT system.
b) Advise Stephen Li whether he should rework the numbers.
c) Advise how Stephen Li could manage John Chan’s concern.
|
Incremental cash flow in your capitol budgeting analysis
: Your company manufactures sports equipment. You are considering replacing a brand of golf clubs with a new line of golf clubs. which of the following is not considered to be an incremental cash flow in your capitol budgeting analysis?
|
|
Determining sample-size is important step
: Determining sample-size is important step when planning a statistical study. It is also quite a difficult task since many variables must be considered.
|
|
Financial statements for the fiscal year
: Halifax Corp. has a December 31 fiscal year-end. The company will release its financial statements for the fiscal year 2015 on March 15th, 2016. A 10-year note payable to Nova Scotia Bank is becoming due on June 30th, 2016. On January 20th, 2016, the..
|
|
Evaluate a deposit/refund system for pesticide containers
: According to the EPA, uncontrolled disposal of pesticide residues and containers contributes significantly to groundwater contamination and hence threatens drinking water supplies. Design and evaluate a deposit/refund system for pesticide ..
|
|
Suppliers for on-time deliveries and high-quality inputs
: Total Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75% but would require a greater dependency on the company’s core suppliers for on-time deliveries and..
|
|
Survey analysis entertainment survey
: Part 1: Survey Analysis Entertainment Survey Using a newspaper article from AIU library's full-text database: National Newspapers (Proquest), create a lecture (with citations) which includes the following:
|
|
Five respiratory hazards-their effects
: Choose two of the five Respiratory Hazards. Provide a brief explanation of each hazard and describe a situation in which you may encounter them. What effects would each of these hazards have on your body?
|
|
Calculate the stocks current dividend yield
: Mocha Crunch Bakery paid its shareholders a dividend of $1.12 per share in the last quarter and $4.25 per share in the last year. The market price per share of Mocha Crunch Bakery is currently $36.59. Calculate the stock's current dividend yield
|
|
Advantages and disadvantages of the surveying methods
: Assume you are a member of the family research Council and have become increasingly concerned about the drug use by professional sports players. You set up a plan and conduct a survey on how people believe in the American culture (television, movi..
|