Many indirect costs in a traditional system become direct costs in a JIT system.

Question

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In a JIT system, there is a focus on reducing waste and minimizing inventory, which often requires the elimination of non-value adding activities and the streamlining of processes. This means that many indirect costs, such as setup time, inspection time, and inventory holding costs, are minimized or eliminated in a JIT system, making them direct costs that are factored into the cost of the product or service.

Many Indirect Costs in a Traditional System Become Direct Costs