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	$500,000	$750,000
Costs as percentage of sales:
Direct materials	20%	17%
Direct labor	8%	7%
Manufacturing Support costs	12%	6%
Workminusinminusprocess inventory	$100,000	$80,000

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

As a result of the layout reorganization, incremental manufacturing costs are projected to:

A.

increase by $25,000 annually.

B.

decrease by $25,000 annually.

C.

increase by $40,000 annually.

D.

decrease by $22,800 annually.