Day: October 9, 2021

Alex’s Big Bikes is a Stafford motorcycle manufacturer. In 2020, it introduced just in time (JIT) in its factories.

This change is most likely to result in?

Select ONE answer:

1. a reduction in the level of buffer inventory
2. an increase in working capital
3. a reduction in the cost of delivery
4. an increase in reorder quantities

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – JIT is an inventory system that does away with the need to hold large quantities of components.  This results in Alex’s Big Bikes only holding just enough components for the current production of motorcycles.  The need for buffer stock is reduced because supplies are delivered for specific production runs/delivered as needed.
2. Not correct – there should be a decrease in working capital as less inventory is held.
3. Not correct – JIT normally requires smaller delivery quantities, more often and this will cost more.
4. Not correct – reorder quantities are likely to decrease as fewer motorcycles are produced and delivered at a time. 

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