A company is thinking about changing the layout of the facilities with these estimations in mind:
-Machine moving and reintallation will cost $100,000
-Total sales will increase by 20% to $1,200,000 b/c of a decrease in production cycle time required under the new plant layout. Average contribution margin (sales dollars - flexible costs) is 31% of sales.
-Inventory-related costs will decrease by 25% because of an expected decrease in work-in-process inventory. Currently, the annual average carrying value of work-in-progress inventory is $200,000. The annual inventory financing cost is 15%.
Should the company implement the proposed changes in layout?© BrainMass Inc. brainmass.com March 4, 2021, 6:26 pm ad1c9bdddf
Please see attached file.
moving machine and reinstallation is $100,000
total sales go up 20% to $1,200,000 b/c of a decrease in...
Average contribution margin (sales-flexible cost) is 31% of ...
This explains the concept of relevant costs and decision making