Speedy Dress Manufacturing Has Two Workstations, Cutting and Finishing

question 142

Multiple Choice

Speedy Dress Manufacturing has two workstations, cutting and finishing. The cutting station is limited by the speed of operating the cutting machine. Finishing is limited by the speed of the workers. Finishing normally waits for work from cutting. Each department works an eight-hour day. If cutting begins work two hours earlier than finishing each day, the two departments generally finish their work at about the same time. Not only does this eliminate the bottleneck, but also it increases finished units produced each day by 210 units. All units produced can be sold even though the change increases inventory stock by 15% from 430 units. The cost of operating the cutting department two more hours each day is $1430. The contribution margin of the finished products is $12 each. Inventory carrying costs are $0.50 per unit per day.
What is the change in the daily contribution margin if the change is made?

• A) $684
• B) $703
• C) $1058
• D) $715

---

Definitions:

Period Balance

The amount of money remaining at the end of a financial or accounting period, after all transactions have been accounted for.

Cost of Goods Sold

Costs directly connected to creating a company's sold products, encompassing materials and manpower.

Finished Goods Inventory

The assortment of goods that are marketed and ready but have not found buyers.

Labor Costs

The total monetary costs associated with the employment of labor, including wages, benefits, and taxes.