Description of Just-in-Time (JIT) System

Description of a Just-in-Time (JIT) System

 

            A Just-in-Time system is a cost management system where cost savings are realized by providing raw materials and supplies to a manufacturing process just-in-time for them to be utilized in the creation of the finished products. Some companies, especially smaller companies with a low amount of capital can benefit by implementing a Just-in-Time (JIT) system because it creates a reduction in Inventory-on-Hand, avoiding the cost of inventory stockpiles and the cost of the rental of inventory floor space. With JIT, the floor space is freed up creating more efficiency since the extra workspace can be used for additional machinery or personnel. Improved efficiency can result in additional sales and increase asset turnover (sales/total assets) (Jessica & Sorooshian, 2013, p.89). More sales result in higher profits. Increased revenue from more sales and decreased expenses from the cost savings of implementing JIT result in higher net income.

Jessica, Y., & Sorooshian, S. (2013). To study the impact of just-in-time system. Journal of           Management & Science, 3(4), 88-90.

Financial Accounting versus Managerial Accounting

I believe that financial (cost) accounting contributes more to a company’s success than managerial accounting. Even though managerial accountants help to increase profit whereas cost accountants only calculate the bottom-line, I still believe that cost accountants are the most important. Managerial accountants could not even do their jobs without the data provided to them by the cost accountants. Managerial accounts depend on accurate, timely, and clear data in order to direct the operations of the business. Cost accountants provide this data. Also, increasingly cost accountants are asked to take a more pro-active role in management and they are part of cross-functional teams helping to make decisions based upon the information they give. For these reasons, I believe that a cost accountant contributes the most to a company’s success.

The Role of Cost Management in a Business

Managerial accounting has increasingly become more than just cost accounting. In fact, nowadays managerial accounting and cost accounting are so inter-related that it is difficult to distinguish between them. However, cost accountants are more concerned with acquiring and calculating information whereas managerial accountants are more concerned with using the information calculated (Fazal, 2011). “Today, managerial accountants serve as internal business consultants, working side-by-side in cross-functional teams with managers from all areas of the organization (Hilton, 2011).”

The role of managerial accountants in a business is to pursue the organization’s goals through the processes of identifying, analyzing, interpreting and communicating information (Hilton, 2011, p.4). In pursuit of these goals, the organization acquires resources, including human capital (labor) and then engages in a set of activities (Hilton, 2011, p.4). Management activities include decision-making, directing operating activities, planning, and controlling (Hilton, 2011, p.4). When making decisions, the managerial accountant chooses the best course of action among the available alternatives. Directing activities involves running the operations of the business on a day-to-day basis. Planning is developing a detailed financial and operational strategy. Controlling is ensuring that the organization operates according to the strategy and achieves its goals (Hilton, 2011, p.6). The objectives of managerial accounting are: 1) to provide information for decision-making and planning; 2) to assist managers in directing and controlling operations; 3) to motivate managers and employees to meet the organization’s goals; 4) to measure performance against goals; and 5) to assess the organization’s competitiveness. Assessing the organization’s competitiveness also includes working with other managers to ensure long-run competitiveness in the industry. Thus, cost accountants are now taking a more pro-active role as they are involved in both strategy and day-to-day decisions (Hilton, 2011, pp.6-7).

Fazal, H. (2011). What is the difference between cost accounting and management accounting? Retrieved from

http://pakaccountants.com/difference-cost-accounting-   management-accounting/

Hilton, R. W.   (2011). Managerial accounting: Creating value in a dynamic business environment.   Boston, MA   McGraw-Hill/Irwin.   ISBN: 978-0078110917