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Illustrations Effect of JIT Purchasing - Relevant Cost Analysis mar Enteprises has decided to adopt JIT policy for materials. The following effects of JIT policy are identified - To implement JIT, the Company has to modify its production and material receipt facilities at a Capital Cost of 6,00,000. The new facilities will require a Cash Operating Cost * 48,000 p.a.. The Capital Cost will be depreciated over 5 years. Raw Material Stockholding will be reduced from * 28,00,000 to 8,00,000. The Company can earn 15% on its long-term investments, The Company can avoid rental expenditure on storage facilities amounting to 7 30,000 per annum. Property Taxes and Insurance amounting to 12,000 will be saved due to JIT programme. Presently there are 7 workers in the Stores Department at a Salary of * 3,000 each per month. After implementing JIT Scheme, only 2 workers will be required in this Department. Of the balance 5 workers, 3 will be transferred to other departments, while 2 workers' employment will be terminated. Due to receipt of smaller lots of Raw Materials, there will be some disruption of production. The Costs of Stock-Out is estimated at 66,000 per annum. termine the financial impact of the JIT policy. Is it advisable for the Company to implement JIT system? Cont Bonefit Analysis of JIT policy

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