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:

Inventory carrying costs are estimated to be 11% per year.

As a result of switching to a cellular manufacturing operation, total benefits are projected to increase annually by:

1. $136,400

2. $113,600

3. $138,600

4. $109,850

Before the change After the change $250,000 $375,000 Total annual sales Costs as percentage of sales: Direct materials Direct labor Manufacturing Support costs Work-in-process inventory $50,000 $20,000 $63,750 $30,000 $30,000 $22.500 $50,000 $ 40,000