ACCA Applied Knowledge · Business and Technology · The relationship between accounting and other business functions
A manufacturer adopts a just-in-time (JIT) approach to production. Which outcome is the most likely effect on the accounting function's work?
JIT lowers inventory holding costs, but accountants must monitor supplier reliability and delivery costs more closely. It does not require larger buffer stocks, which is the opposite of JIT, and it does not remove the need to control purchase costs.
- ALower inventory holding costs, but greater reliance on supplier reliability data and delivery-cost monitoringCorrect
- BA need to hold larger buffer inventories, increasing inventory valuation work
- CElimination of the need for any cost control over purchases
Explanation
JIT aims to reduce inventory by receiving goods only when needed, cutting holding costs. Accountants then monitor supplier performance and delivery costs. Larger buffer stocks contradict JIT, and purchase cost control remains necessary.
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