In a just-in-time operating environment, the key measure of cost incurred is
A) direct labor hours.
B) push-through time.
C) throughput time.
D) indirect costs.

Question

Quizplus · Accepted Answer

In a just-in-time operating environment, the emphasis is on reducing lead times and increasing efficiency. Therefore, the key measure of cost incurred is throughput time, which is the amount of time that it takes to convert raw materials into finished goods ready for sale. By minimizing throughput time, a company can lower inventory carrying costs, reduce waste, and maximize productivity. Direct labor hours and indirect costs may also be important measures, but they are not as directly related to the goals of a JIT system. Push-through time is not a standard measure of cost incurred in manufacturing.

In a Just-In-Time Operating Environment, the Key Measure of Cost