Just in time system and back flush costing
Just in time a philosophy about producing goods
or providing services as needed.
Just in time inventory management represents
the continual pursuit of productivity through the
elimination of wastes.
Just in time manufacturing the objective of this
concept is the elimination of waste by producing a
part or product only when it is needed and only in
the quantities demanded by customers.
Just in time purchasing requires suppliers to
deliver parts and materials just in time to be used
in production.
Primary goals of JIT
Eliminating any production process or
operation that does not add value to the
product or service.
Continuously improving production or
performance efficiency.
Reducing the total cost of production or
performance while increasing quality.
Strategic objectives of JIT
To increase profits
To improve competitive position
Objectives of JIT are achieved by
Controlling costs (enabling better price
completion and increased profits).
Improving delivery performance.
Improving quality.
Effects of JIT
Increased cost efficiency.
Respond to customer demands for better
and more variety products.
Features of JIT
Continuous replenishment supplier of
materials assumes the inventory
management of the customers. The
supplier dictates the customers when and
how much stock to reorder and the
customer simply approves the plan if it is
feasible.
Electronic data interchange a paperless
transaction wherein the supplier is
allowed to access the database of the
customers production schedule so that it
can determine its own production and
delivery schedules in order to satisfy the
needs of the customers just in time when
the materials are needed.
Total preventive maintenance during
idle time, the workers are trained in the
maintenance of the machines they
operate.
Total quality control the problem of
defective parts is solved by striving for
zero defects where each worker serves as
quality control checkpoints during the
production process.
Acceptable quality level this
permits or allows defects to occur
provided that they do not exceed
a predetermined level.
Kanban system this is an information
system that controls production through
the use of markers or stock cards that
ensures materials or parts are available in
the necessary quantities at the necessary
time.
Withdrawal Kanban specifies the
quantity that a subsequent
production process should
withdraw from the preceding
process.
Production Kanban specifies the
quantities that the preceding
process should produce.
Vendor Kanban used to notify
suppliers to deliver more
materials, parts, or supplies and
when it is needed.
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Just in time system and back flush costing

Employee empowerment workers are
given an increased degree of
participation in how the plant operates
resulting to increased productivity and
overall cost efficiency.
Product design product design should
use the fewest number of dissimilar parts
and to minimize production steps and
risks.
Plant layout the physical organization
of the manufacturing plant should be
conducive to the flow of goods and the
location of worker in order to increase
the value added per area and minimize
handling time, lead time and movement
of goods from raw materials to finished
products.
Raw and in process account account used to
track the cost of raw materials purchased and
issued to production.
Conversion cost control account used to track
the cost of labor and factory overhead assigned to
production.
Debited for actual conversion costs.
Credited for applying conversion costs.
Any difference between actual and
applied conversion is closed to cost of
goods sold.
Answer exercises 11-5, 11-14, 11-15, 11-16, 11-
17, 11-18

JIT costing versus traditional costing

Instead of using separate accounts for
materials and work in process, raw and in
process account is used.
Direct labor is usually considered a minor
cost and is lumped with factory overhead
under conversion cost account.
Traditional costing applies factory
overhead to work in process as goods are
produced. Under JIT, factory overhead is
applied until they are finished or sold.

Backflush costing a simplified approach to

recording manufacturing transactions under JIT
that uses trigger points to determine when
manufacturing costs are assigned to key inventory
and temporary accounts.

Trigger points indicates the time or period when

manufacturing costs will be recognized or
recorded.
Purchase of raw materials and
completion of goods
Purchase of raw materials and sale of
goods
Completion of goods
Sale of goods