Question
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:
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:
| Before the change | After the change |
Total annual sales | $250,000 | $375,000 |
Costs as percentage of sales: |
|
|
Direct materials | $50,000 | $63,750 |
Direct labor | $20,000 | $30,000 |
Manufacturing Support costs | $30,000 | $22,500 |
Work-in-process inventory | $50,000 | $ 40,000 |
Inventory carrying costs are estimated to be 11% per year.
As a result of the layout reorganization, incremental manufacturing costs are projected to:
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