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:

-As a result of the layout reorganization,reduced levels of work-in-process inventory are projected to decrease inventory carrying costs annually by:
A)$ 2,200.
B)$ 7,500.
C)$ 8,800.
D)$11,000.

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:
 
-As a result of the layout reorganization,reduced levels of work-in-process inventory are projected to decrease inventory carrying costs annually by:
A)$ 2,200. 
B)$ 7,500. 
C)$ 8,800. 
D)$11,000.

Quizplus · Accepted Answer

A) (Before: $100,000 × 11%)less ( After: $80,000 × 11%)equals cost savings of $2,200.