The Jarvis Corporation produces bucket loader assemblies for the tractor industry. The product has a long term life expectancy. Jarvis has a traditional manufacturing and inventory system. Jarvis is considering the installation of a just-in-time inventory system to improve its cost structure. In doing a full study using its manufacturing engineering team as well as consulting with industry JIT experts and the main vendors and suppliers of the components Jarvis uses to manufacture the bucket loader assemblies, the following incremental cost-benefit relevant information is available for analysis:
The Jarvis cost of investment capital hurdle rate is 15%.
One time cost to rearrange the shop floor to create the manufacturing cell workstations is $275,000.
One time cost to retrain the existing workforce for the JIT required skills is $60,000.
Anticipated defect reduction is 40%. Currently there is a cost of quality defect assessment listed as $150,000 per year.
The setup time for each of the existing functions will be reduced by 67%. Currently the forecast for setup costs are $225,000 per year.
Jarvis will expect to save $200,000 per year in carrying costs as a result of having a lower inventory.
The suppliers will require a 15% premium over the current level of prices in order to position themselves to supply the material on a smaller and more frequent schedule. Currently the materials purchases are $1,500,000 per year.
Required:
Determine whether it is in the best interest of Jarvis Corporation to install a JIT system.
X chromosome inactivation in female mammals produces the Barr Body.
With a fortune of $66 billion, Bill Gates, a cofounder of Microsoft Corporation, is the second ...
The impact of industry and manufacturing on our life
Overallocation of Labor to Farming When Farmworkers Are Paid Their Average Product
To find the derivative use product rule
Find derivative using product rule