Relevant Cost Analysis—Conversion to JIT; Spreadsheet Application As part of its commitment to quality, the J. J. Borden manufacturing company is proposing to introduce just-in-time (JIT) production...

Relevant Cost Analysis—Conversion to JIT; Spreadsheet Application As part of its commitment to quality, the J. J. Borden manufacturing company is proposing to introduce just-in-time (JIT) production methods. Managers of the company have an intuitive feel regarding the financial benefits associated with a change to JIT, but they would like to have some data to inform their decision making in this regard. You are provided with the following data:

Required

1. As the management accountant for the company, construct an Excel spreadsheet that can be used to estimate the financial benefits associated with the adoption of JIT. Specifically, what is the estimated change in annual operating income (to the nearest whole dollar) attributable to the JIT implementation? 2. Provide some explanations as to how or why sales would be expected to increase after a JIT implementation. 3. In the above example, a reduction of both direct and indirect (i.e., support) costs are predicted. Explain how or why a reduction in each of these two classes of cost might occur in conjunction with a JIT implementation.