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 11% 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)$ 1,100.
B)$ 3,750.
C)$ 4,400.
D)$5,500.

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:

Inventory carrying costs are estimated to be 11%  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)$ 1,100. 
B)$ 3,750. 
C)$ 4,400. 
D)$5,500.

Quizplus · Accepted Answer

A)(Before: $50,000 × 11%)less ( After: $40,000 × 11%)equals cost savings of $1,100.