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AB Company is considering a move to JIT & thus will have a change in its plant layout. You the controller have been asked to
AB Company is considering a move to JIT & thus will have a change in its plant layout. You the controller have been asked to evaluate the costs & benefits of the change in plant layout. you have compiled the following estimates: Machine moving & reinstallation will cost $100,000. Total Sales will increase by 20% to $1,200,000 because of a decrease in production cycle time. Average contribution margin is 31% of sales. Inventory related costs will decrease by 25%. Currently, the annual average carrying value of the inventory is $200,000. The annual inventory financing cost is 15% Prepare in good form (PRESENTATION) a schedule showing the current estimated contributed margin (including inventory financing charges) as compared to proposed change to JIT. The machine moving & reinstallation cost of $100,000 is a sunk cost & will be recovered from any additional contributed margin created from the switch Approximately how many years at the increase CM margin level will it take to recovery the $100,000. (do not get crazy with your rounding) (answer should be presented as something like 2.4 years)
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