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Lopez Company is experiencing a bottleneck in its plant. Setup time has been identified as the bottleneck. The production manager has proposed a plan to
Lopez Company is experiencing a bottleneck in its plant. Setup time has been identified as the bottleneck. The production manager has proposed a plan to reconfigure the plant layout that will reduce setup time. The following Information is available regarding this change: Cost of Reconfiguration $43,000 Additional unit production and sales 9,400 Selling price $15.50 Direct Materials $ 5.00 Direct Labor Variable Overhead $ 4.50 $ 2.00 Which of the following best describes the financial results and whether Lopez Co. should go forward with the reconfiguration? Multiple Choice Decrease Operating Income by $5,400, reject the proposal. Increase Operating Income by $33,600, accept the proposal. No change to Operating Income, reject the proposal. Increase Operating Income by $13,400, accept the proposal
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