Boston Company is trying to decide whether or not to change from a traditional inventory system to a just-in-time (JIT) system. The president, Teresa Francona, wants to know whether this change merely will affect how goods are ordered and produced, or if it will also impact the financial health of the company, as well as the accounting system itself. The controller, Dona Ortiz, is preparing a report estimating any expected cost savings and changes to the accounting system resilting from a move to JIT.
1) What are some of the costs that should be affected by the introduction of a JIT system?
2) Should Francona's customers reap any benefits from the change to JIT?
3) Will Donna have to make any changes to the way that inventory is accounted for under a JIT system?