Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed



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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1
Solution Exhibit 21.20
Annual relevant costs of current production system and JIT production system for Turun
Telelaitos





Relevant items

Incremental costs
under current
production
system

Incremental
costs under
JIT
production
system
Annual tooling costs Required return on investment
12% per year
× €900,000 of average stock per year
12% per year
× €200,000 of average stock per year Insurance, space, materials handling and setup costs Rework costs Incremental revenues from higher selling prices Total net incremental costs

€108,000 200,000 350,000

€658,000
€150,000 24,000 ab (c Annual difference in favour of JIT production


€154,000


a
€200,000 (1 – 0.30) = €140,000 b (1 – 0.20) = €280,000 c
× 30,000 units = €90,000

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