JIT FEATURES AND PRODUCT COSTING ACCURACY

Prior to installing a JIT system, Pohlson Company, a producer of bicycle parts, used maintenance hours to assign maintenance costs to its three products (wheels, seats, and  handle bars). The maintenance costs totaled $1,960,000 per year. The maintenance ours used by each product and the quantity of each product produced are as follows: 

Â	Maintenance Hours	Quantity Produced
Wheels	60,000	52,500
Seats	60,000	52,500
Handle bars	80,000	70,000

After installing JIT, three manufacturing cells were created, and cell workers were trained to perform preventive maintenance and minor repairs. A full-time maintenance person was also assigned to each cell. Maintenance costs for the three cells still totaled $1,960,000; however, these costs are now traceable to each cell as follows:

Cell, wheels	$532,000
Cell, seats	588,000
Cell, handle bars	840,000

Required:

1. Compute the pre-JIT maintenance cost per unit for each product.

2. Compute the maintenance cost per unit for each product after installing JIT.

3. Explain why the JIT maintenance cost per unit is more accurate than the pre-JIT cost.