Vander Belt Manufacturing, Inc., is considering reorganizing its plant into manufacturing cells. The following estimates...
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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 | $250,000 | $375,000 |
| Costs as percentage of sales: | ||
| Direct materials | 20% | 17% |
| Direct labor | 8% | 7% |
| Manufacturing Support costs | 12% | 6% |
| Workminusinminusprocess inventory | $50,000 | $ 40,000 |
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.
$5,500.
B.
$ 1,100.
C.
$ 3,750.
D.
$ 4,400.
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