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Which TWO of the following costs are likely to rise when just-in-time (JIT) manufacturing is introduced?
1) Set-up costs
2) Raw material handling costs
3) Raw material storage costs
4) Customer order costs
Answer: 1 & 2
Hello tutor!
I’m not sure about what is raw material handling cost actually is so please clear my concept about this and 2nd, please tell me why raw material handling cost will rise in JIT environment please.They are the costs involved in dealing with each arrival of raw material from the suppliers (such as the work checking the delivery is correct, and the work transferring it to the people who will be working on it). The reason that it is likely to increase is the in a JIT environment there will be more deliveries being received.
But sir in the BPP Text they are saying that cost driver for Material handling cost is NUMBER OF PRODUCTION RUNS.
Okay we agree with them that NUMBER OF PRODUCTION RUNS is the cost driver (but in JIT environment).
Then on the other page in BPP text, they are saying that NUMBER OF ORDERS is the cost driver for both material handling and dispatch cost.
Now I’m confusing in these cost drivers.They are effectively the same. The more orders of materials that the are from the suppliers then the more production runs there will be.
Have you watched my lectures on this? If you are watching the lectures then you do not really need the Study Text. Far more important is the Revision Kit which is full of past exam and other exam standard questions to practice 🙂
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