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Vander Belt Manufacturing, Inc., is considering reorganizing its plant into manufacturing cells. The following estimates...

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Accounting

Vander Belt Manufacturing, Inc., is considering reorganizing its plant into manufacturing cells. The following estimates have been prepared to evaluate the benefits from the reorganization:

Before the change

After the change

Total annual sales

$500,000

$750,000

Costs as percentage of sales:

Direct materials

20%

17%

Direct labor

8%

7%

Manufacturing Support costs

12%

6%

Workminusinminusprocess

inventory

$100,000

$80,000

Inventory carrying costs are estimated to be 11% per year.

As a result of the layout reorganization, reduced levels of

workminusinminusprocess

inventory are projected to decrease inventory carrying costs annually by:

A.

$11,000.

B.

$ 8,800.

C.

$ 7,500.

D.

$ 2,200.

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