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One of the primary elements of a lean operation is to produce on a just-in-time (JIT) basis. The elements of a JIT environment are minimum inventory levels, pull-through production, quick setup and flexible work cells, a multiskilled work force, high levels of product quality, effective preventive maintenance, and continuous improvement of the work environment. In product costing under JIT, processing costs are classified as either direct materials costs or conversion costs. The costs associated with inspection time, moving time, queue time, and storage time are reduced or eliminated. With computerized monitoring of the work cells, many costs that are treated as indirect or overhead costs in traditional manufacturing settings become direct costs since they can be traced directly to work cells. The only costs that remain indirect costs and must be assigned to the work cells are those that cannot be linked to a specific work cell, such as building occupancy, insurance, and property taxes.
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