Relevant cost and revenues: changes in facilities layout To facilitate a move to¬ ward JIT production, AB Company is considering a change in its plant layout. The plant controller, Anita Bentley, has been asked to evaluate the costs and ben¬ efits of the change in plant layout. After meeting with production and marketing managers, Anita has compiled the following estimates:

■ Machine moving and reinstallation will cost $100,000.

■ Total sales will increase by 20% to $1,200,000 because of a decrease in pro¬ duction cycle time required under the new plant layout. Average contribution margin (sales dollars minus variable costs) is 31% of sales.

■ Inventory-related costs will decrease by 25% because of an expected decrease in work-in-process inventory. Currently, the annual average carrying value of work- in-process inventory is $200,000. The annual inventory financing cost is 15%.

Should AB implement the proposed change in plant layout? Support your answer.