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
$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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