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Which of the following is not a benefit likely to arise from the implementation of a ‘just in time’ costing system?

(a) A reduction in ordering costs. (b) A reduction in raw material stock holding costs. (c) A reduction in the investment in working capital. (d) A reduction in production delays as a result of ‘stockouts’.

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Question added by Deleted user
Date Posted: 2013/08/25
Khaled Abdelrehim ACCA DipIFR CMA
by Khaled Abdelrehim ACCA DipIFR CMA , Financial Analysis Assistant General Manager , Khalda Petroleum Company

(d) A reduction in production delays as a result of stock outs.

Deleted user
by Deleted user

A reduction in production delays as a result of ‘stockouts’

Nagoorammal Abdul Rahman
by Nagoorammal Abdul Rahman , Finance Manager , Vox Spectrum Limited

Answer is D: A reduction in productiondelays as a result of stockouts.
At times, JIT may affect the production process if there are delays in receiving materials on time.
At the same time option A too is not fully correct because JIT's major benefit is not a saving in ordering costs.
It might increase the ordering cost if the requirement arises often.
A reduction in ordering costs.
Because the goods are ordered as and when needed and it will lead to increase the ordering cost.
the other 2 options such as reduction in raw material stock holding cost is a Major benefit, A reduction in the investment in working capital yes it is as we dont need to block cash for keeping Inventory.

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