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 10% per year.
1. As a result of the layout reorganization, reduced levels of work-in-process inventory are projected to decrease inventory carrying costs annually by how much?
2. As a result of the layout reorganization, incremental manufacturing costs are projected change by how much?
3. As a result of switching to a cellular manufacturing operation, total benefits are projected to increase annually by how much?

Transcribed Image Text:

before the change after the change $500,000 S750,000 Total annual sales Costs Percentage of sales: Direct Materials 17% 20% 8% 8% Direct Labor Manufacturing support costs 17% 6% $150,000 $125,000 work in process inventory