Response to the following problem:
Wild Rides manufactures snowboards. Shawn Mobbs, the CEO, is trying to decide whether to adopt just-in-time (JIT). He expects that in present-value terms, adopting JIT would save $97,000 in warehousing expenses and $46,000 in spoilage costs.
Adopting JIT will require several one-time up-front expenditures:
(1) $13,500 for an employee training program,
(2) $37,000 to streamline the plant's production process, and
(3) $8,000 to identify suppliers that will guarantee zero defects and on-time delivery.
Required:
1. What are the total costs of adopting JIT?
2. What are the total benefits of adopting JIT?
3. Should Wild Rides adopt JIT? Why or why not?