Answer the Following Question(s)using the Information Below

question 155

Multiple Choice

Answer the following question(s) using the information below.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 160 units.All units produced can be sold even though the change increases inventory stock by 20% from 400 units.The cost of operating the cutting department two more hours each day is $1,600.The contribution margin of the finished products is $6 each.Inventory carrying costs are $0.40 per unit per day.
-The Glass Shop, a manufacturer of large windows, is experiencing a bottleneck in its plant.Setup time at one of its workstations has been identified as the culprit.A manager has proposed a plan to reduce setup time at a cost of $72,000.The change will result in 8,000 additional windows.The selling price per window is $18, direct labour costs are $3 per window, and the cost of direct materials is $5 per window.Assume all units produced can be sold.The change will result in an increase in the throughput contribution of

• A)$104,000.
• B)$80,000.
• C)$32,000.
• D)$8,000.
• E)$120,000.

---

Definitions:

Gross Profit Ratio

A financial metric used to assess a company’s financial health by dividing gross profit by net sales.

Lost Inventory

Inventory that is unaccounted for due to theft, damage, or error, leading to discrepancies in stock records.

Gross Profit Method

The Gross Profit Method estimates the cost of goods sold and the ending inventory value by applying the company's average gross profit percentage to its net sales.

Lower Of Cost

An accounting principle that values inventory at the lower of its historical cost or market value.