Cost Accounting and Cost Management in a JIT Environment
Just-in-time production is an approach aimed mainly at reducing flow times in a production system, as well as response times from suppliers, and to customers. It originated in Japan, and was largely developed in the 1960s and 1970s, and notably by Toyota.
The purpose of JIT production is to avoid wastage associated with overproduction, waiting and excess inventory, three of the seven waste categories explained in the Toyota Production System.
This inventory supply system represents a shift away from the tradtional just-in-case strategy, in which producers kept huge inventories anticipating higher demand.
The following paragraphs describe the various components of a JIT system and how
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• Reduced attention on individual labour and overhead variances.
Cost Management with JIT
• Cost planning - Starts before production begins and in some cases before the production line is established.
• Cost Reduction - Appears in both pre-production and production stages.
• Cost Controls - Appears during production.
The Effect on Management Accountants
The changes made in the accounting system are directly associated to the changes in the quality control system of the division, which results in a need for larger interaction between the two functional areas. Firstly, due to the JIT process, the granularity of accounting analysis is reduced. The cost accounting process has become a much less finely detailed process calculating costs via an ex-post averaging of collective expenditures over produced units instead of the traditional procedure of calculating the cost of specific units or batches of units. Secondly, with the reduction in granularity of accounting calculations, the calculations monitored by the quality assurance information systems have become increasingly fine. Use of cutting-edge information technologies allow for the tracking of individual units and subunits, to answer the question earlier answered with accounting data: what was the deviation between actual production rate and standard production rate. This denotes a change in focus from financial information to non-financial
John Deere Component Works (JDCW), subdivision of John Deere and Co. was in charged specifically of the manufacturing of tractor component parts. The demand for JDCW’s products had problems due to the collapse of farmland value and commodity prices. Numerous and constant failures in JDCW’s competition for bids, alerted top management to start questioning their current costing methods. As an outcome, the analysis has to be guided to research on the current costing methods with the intention of establishing legitimacy and to help the company in adopting a more appropriate costing system.
TPS is based on the concept of Heijunka, evening out production to meet the fluctuations of demand and eliminating unnecessary inventory. Heijunka focused on eliminating waste, as it related to overproducti...
A production system is a combination of many processes and steps, it is important for all the workstations operators to have an idea of what work is to be done, how many products to roll out etc. In the Toyota Production System this is controlled by a system known as Kanban. Kanban is a signaling system for implementing just-in-time (JIT) production[3].Kanban is a like a piece of paper which contains information to the particular operators on what is to be done, the quantity, duration etc. Thus by using this system all the workstations are well informed on what is to be done. This reduces failure (deviations) and mainly there will be no overproduction which is very important in manufacturing....
During this project, I am going to mention the details of TOYOTA production process system which was developed more than 40 years ago by Taiichi Ohno, the president of Toyota Motor company at that time. The production system that Toyota company uses now and before is relevant to the concept of the process costing system which is currently used in all department of the company.
There are many items that sell at the J-mart. The owner has to order more staple merchandises because those kinds of merchandises were the store basic stock. Besides that, those kinds of merchandises normally will have more demand by the customers. The owner needs to have enough goods on hand in order to satisfy the customers and to prevent out of stock situation. Next, for the assortment merchandise the owner can order in the quantity that less than staple merchandise because those kinds of merchandises were not the store basic products. This is to prevent excessive merchandise in the store.
...ility. Based on the data collection, the improvement activity for Indian and Thai automotive manufacturer is Total Quality management and Just-In-Time (JIT) respectively which align with their top competitive priority.
This article discusses in depth the implementation of JIT manufacturing. The objectives are twofold. The first objective is to acquaint the reader with the overall JIT concept and the factors necessary for its implementation; the concepts presented here represent the ideal principles and methods of implementation.
Toyota introduced JIT approach in 1950 when the company faced tough competition, high capital investment, rapid change in automobile market in terms of price value and technology. The need to introduce JIT to Toyota, the primary need is to control the over production which is being on Toyota shop floor producing items irrespective of market demand following PUSH system conventionally which is later replaced by PULL system by TPS. The other main reason to introduce JIT is to track the order and status of INVENTORY, which was the main problem on the Toyota shop floor. Even though JIT was proposed in 1950, it took 30 long years to apply. Produce only the quantity number that is purchased by the customer Don’t produce the excess quantity than mentioned in Kanban because it leads to unwanted inventory at the shop floor and at the supplier.
Takt time is an important lean manufacturing concept that was developed by Toyota to help balance production lines and optimize process flow. To define the term more specifically takt time is expressed in seconds and is used to determine the “rate of customer demand by dividing daily demand in units into the time available for production” (Mann, 2010, p. 270). It important to note that takt time is performed for individual processes so that each step in manufacturing is balanced to takt time, or as equal in length of time as possible. Takt time is therefore much different from cycle time which is overall process time (Huang, Li, Yuan, Gao & Rao, 2012).
Maintaining the operating equipment at a responsive level to the need of production in terms of delivery schedule and quality.
Today manufacturing environment is rapidly changing. Alteration stimulates the necessity of manufacturing companies’ owners and managers to make fast and smart decisions, going through the global variance of business, management, accounting techniques, high technologies and science. Management accounting destined to produce useful information about product cost, budgeting and performance report. There was significant influence in management accounting system because of changes, such as import tariffs reduction, employment practices and implementation of new practices. In order to succeed each company chooses its own way of guiding business through different ways of management accounting techniques. In the last few decades new tools and techniques of management accounting were developed through information and the latest manufacturing technologies. Investigation of new methods consequently became an occasion for partly losing the previous necessity of traditional techniques of management accounting system. The modern techniques like TQM (Total Quality Management), ABC (Activity Based Costing), JIT (Just in Time) were introduced and started to achieve popularity of usage among many manufacturing organizations. The presented assignment investigates either the traditional or modern methods of management accounting are useful in today’s era of global competition.
Job production is, in essence, manufacturing on a contract basis. Each job is usually different from each other, they require general purpose equipment and machinery, varied work layouts and so require different planning, processing and controlling. The production process tends to be labor-intensive where the workforce is usually a multi-skilled and adaptable workforce who specialized in specific tasks. Creative decisions and adaptations need to be made about how to use general purpose equipment to produce varied products and purchasing lead times may be slow because of the need to purchase raw materials from unfamiliar suppliers and getting the correct specifications. As a result, job production can be a very expensive
Process costing relies on a very distinct flow of units through the company’s production system. Homogenous goods flow through several various production processes. Each process has a specific amount of costs linked with producing products. Costs may include direct materials, production labor and manufacturing overhead. These items represent the direct costs related to specific production of goods. Manufacturers have different types of processes they use when producing goods. In the wine industry...
The company needs to sustain two cost systems and accounts, one for internal use and another for external reports since the direct use of accounting method in analysis of the ABC data cannot be used. Different reports are required to prepare for different purposes in ABC costing lead to additional works that making the resources not using productively.
To explain Kaizen, the nature of Kaizen helps to understand itself. The word, Kaizen, has gained recognition in the English vocabulary now. In Japanese, Kaizen means continuous improvement. The word implies improvement that involves all workers and entails relatively little expense. Toyota has been known as the first company that has started Kaizen. The application that Toyota used was called "Toyota Production System", where all line personnel are expected to stop their moving production line in the case of any abnormality, and suggestions for improvement are rewarded. They succeeded eliminating all the wastes. Kaizen is used for placing the terms as productivity, total quality control (TQC), zero defects (ZD), and just-in-time (JIT). Therefore, Kaizen is a main concept for all these practices.