Turbo-Oven, Inc

question 121

Essay

Turbo-Oven, Inc. is considering a move to cellular manufacturing. Management of the company has requested from you, as the management accountant, to supply it with information that will help inform the decision as to whether or not such a move is desirable. Your research into past performance of the company as well as extensive discussion with the manager of operations and the sales manager produced the following information.
Required:
1. In terms of the above information, provide for management of the company a rationale as to why you included each of the following items:
a. increase in total sales revenue
b. decrease in direct materials cost as a percentage of sales
c. decrease in holdings of Work-in-Process (WIP) inventory
2. Provide an estimate of each of the following financial effects associated with the proposed move to a cellular manufacturing layout:
a. change in total (out-of-pocket) manufacturing costs
b. reduction in WIP inventory holdings
c. net financial effect of the change, per year
3. In general, what types of costs would need to be incurred in order to reap the benefits outlined above in Requirement 2?

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Definitions:

Training Employees

The process of enhancing the skills, knowledge, and competencies of staff within an organization to improve their job performance.

Business Relationship

A connection between two or more entities involved in commercial transactions or partnerships, characterized by mutual goals, communication, and often, contractual agreements.

Funeral Home

A business establishment that provides services related to the burial, cremation, and memorialization of deceased individuals.

Foreign Markets

The markets outside the domestic boundaries of a country where businesses seek to expand their operations and sales.