Victoria Co. recently introduced a new inventory control system In an effort to improve its competitive position, Its management accountant assembled the following data regarding the recent change:

Item Before new system After new system

Production cycle time 50 days 40 days

Inventory level (daily average) $400,000 $360,000

Total sales $1,500,000 $1,600,000

Estimated cost data, % of sales

Direct materials 35% 35%

Direct labor 20% 18%

Variable overhead 15% 15%

Fixed overhead 10% 10%

The company's inventory financing cost is estimated as 10% per year.

Required:

a) Estimate the net operating income that the company realized under the current inventory control system.

b) Estimate the net financial benefit (expressed in terms of operating income) that the company realized from the new inventory control system.

c) Estimate the net financial benefit (expressed in terms of operating income) that the company realized from switching to the new inventory control system.

d) List four (4) non-financial benefits the company might expect as a result to its move to new inventory control system.