Slumberger Manufacturing Co

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1. The proposed change in plant layout is expected to reduce Work-in-Process inventories by approximately $35,000 during each year (given). At an opportunity cost (i.e., cost of capital) of 10%, the annual cost savings associated with a reduction in holding of WIP inventory is estimated to be 10% × $35,000 = $3,500.
2. Under the revised plant layout option, total (out-of-pocket) manufacturing costs are expected to increase by $20,000 per year: a) Total current manufacturing cost = $600,000 x 50% = $300,000 per year. b) Revised total manufacturing cost = $800,000 × 40% = $320,000 per year.4. As noted in the text, a comprehensive reporting model for the plant layout move would include both financial information (per the above) and nonfinancial performance indicators. The following are plausible nonfinancial performance indicators that the company might want to monitor in conjunction with the proposed change. (Note: answers should be linked specifically to the specific change being contemplated by the example at hand.)
:
1. Machine uptime (or the converse, machine downtime)
2. Trend in dollar amount of inventory held.
3. Production (manufacturing) lead time.
4. Cycle time efficiency (i.e., process cycle efficiency = ratio of value-added time to total manufacturing time).
5. Throughput efficiency (i.e., ratio of throughput to some measure of resources used)
(i.e., customer satisfaction measures):
1. Customer response time (CRT) (that is, total lapse of time between receipt of a customer's order and actual receipt of that order by the customer)
2. Number of defective units shipped to customers.
3. Delivery delays.
4. On-time delivery performance (i.e., percentage of shipments to customers made on or before the promised delivery date)
3. Total annual financial results, including both out-of-pocket and opportunity costs, are expected to increase by $183,500, as follows:

Answer may vary Feedback: 1. The proposed change in plant layout is expected to reduce Work-in-Process inventories by approximately $35,000 during each year (given). At an opportunity cost (i.e., cost of capital) of 10%, the annual cost savings associated with a reduction in holding of WIP inventory is estimated to be 10% × $35,000 = $3,500. 2. Under the revised plant layout option, total (out-of-pocket) manufacturing costs are expected to increase by $20,000 per year: a) Total current manufacturing cost = $600,000 x 50% = $300,000 per year. b) Revised total manufacturing cost = $800,000 × 40% = $320,000 per year.4. As noted in the text, a comprehensive reporting model for the plant layout move would include both financial information (per the above) and nonfinancial performance indicators. The following are plausible nonfinancial performance indicators that the company might want to monitor in conjunction with the proposed change. (Note: answers should be linked specifically to the specific change being contemplated by the example at hand.) : 1. Machine uptime (or the converse, machine downtime) 2. Trend in dollar amount of inventory held. 3. Production (manufacturing) lead time. 4. Cycle time efficiency (i.e., process cycle efficiency = ratio of value-added time to total manufacturing time). 5. Throughput efficiency (i.e., ratio of throughput to some measure of resources used) (i.e., customer satisfaction measures): 1. Customer response time (CRT) (that is, total lapse of time between receipt of a customer's order and actual receipt of that order by the customer) 2. Number of defective units shipped to customers. 3. Delivery delays. 4. On-time delivery performance (i.e., percentage of shipments to customers made on or before the promised delivery date) 3. Total annual financial results, including both out-of-pocket and opportunity costs, are expected to increase by $183,500, as follows:

Slumberger Manufacturing Co

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