Umberger Manufacturing, Inc., is considering reorganizing its plant into manufacturing cells. The following estimates have been prepared
Question:
Umberger 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 $600,000 $800,000
Costs as a percentage of sales:
Direct materials 23% 20%
Direct labor 9% 7%
Manufacturing Support costs 18% 13%
Work in process inventory $125,000 $90,000
Inventory carrying costs are estimated to be 10% per year.
As a result of the layout reorganization, reduced levels of work in process inventory are projected to decrease inventory carrying costs annually by:
A. $ 9,000. B. $12,500. C. $ 3,500. D. $ 6,000.
Fundamental Accounting Principles Volume 1
ISBN: 9781259259807
15th Canadian edition
Authors: Kermit Larson, Tilly Jensen, Heidi Dieckmann