Problem 1.4

1.4 On the average, a company has a work-in-process lead time of 10 weeks and annual cost of goods sold of $30 million. Assuming that the company works 50 weeks a year:

What is the dollar value of the work-in-process?

If the work-in-process could be reduced to 5 weeks and the annual cost of carrying inventory was 20% of the WIP inventory value, what would be the annual savings?

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Problem 1.5

1.5 Amalgamated Fenderdenters sales are $10 million. The company spends $3.5 million for purchase of direct materials and $2.5 million for direct labor; overhead is $3.5 million and profit is $500,000. Direct labor and direct material vary directly with sales, but overhead does not. The company wants to double its profit.

By how much should the firm increase annual sales?

By how much should the firm decrease material costs?

By how much should the firm decrease labor cost?