Response to the following :
1. JIT costing is typically used by businesses that (1) assign standard costs to each product and (2) have low inventories. Explain why each of these conditions makes JIT costing more feasible.
2. Millan & Co. makes electronic components. Mike Millan, the president, recently instructed vice president Steve Bensen to develop a total quality control program. "If we don't at least match the quality improvements our competitors are making," he told Bensen, "we'll soon be out of business."
Bensen began by listing various "costs of quality" that Millan incurs. The first six items that came to mind were
a. Costs incurred by Millan customer representatives traveling to customer sites to repair defective products
b. Lost profits from lost sales due to reputation for less-than-perfect products
c. Costs of inspecting components in one of Millan's production processes
d. Salaries of engineers who are designing components to withstand electrical overloads
e. Costs of electronic components returned by customers
f. Costs of reworking defective components after discovery by company inspectors
Required:
Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.