Taft Company produces 5,000 pallets each day.The average number of units in work in process is 10,000,having an average cost of $35,000.The annual carrying costs related to inventory are 20%. Consultants have determined that the work in process could be reduced by as much as 25% by rearranging the factory floor.What would the throughput time be if Harrison implements the recommended changes?
A)Twelve hours
B)One day
C)One and one-half days
D)Two days

Question

Quizplus · Accepted Answer

The current throughput time is 2 days (10,000 units / 5,000 units per day). Reducing work in process by 25% means the new work in process is 7,500 units. The new throughput time is 7,500 units / 5,000 units per day = 1.5 days.

Taft Company Produces 5,000 Pallets Each Day