Essay by skykendyA, May 2014

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Final Assessment

Question 1

Carey Manufacturing, Inc., is considering reorganizing its plant into manufacturing cells. The following estimates have been prepared to evaluate the benefits from the reorganization:

Before the change

After the change

Total annual sales

$ 700,000


Costs as percentage of sales:

Direct materials



Direct labor



Support costs



Work-in -process inventory



Inventory carrying costs are estimated to be 12% per year.


Why do the layout reorganization estimates include

from carrying reduced levels of work-in-process inventory?

a decrease in direct material costs as a percentage of sales?

an increase in sales?

As a result of the layout reorganization, what amount of annul change is projected

form carrying reduced levels of work-in-process inventory?

for incremental manufacturing costs?

in total benefits?



1. Layout reorganization estimates include a decrease in work-in-process inventory because cellular manufacturing streamlines production flows. When products flow immediately from one processing stage to the next, there is less build-up of work-in-process inventories.

Question 2

Identify and explain each of the three major cycles of the total-life-cycle-costing approach

How does the total-life-cycle costing approach differ from traditional product-costing? Explain.


Research, Development, and engineering cycle: target costing and value engineering Manufacturing cycle: activity-based costing, Kaizen costing post-sale service and disposal cycle

Each part of value chain is managed by different organizational function it integrates the trade-offs and performance over time and functional units


The three major cycles of the total-life cycle costing approach are: research, development, and engineering (RD&E); manufacturing; and post-sale service and disposal.

The research, development, and engineering cycle has three stages: 1. Using market research to assess emerging customer needs that leads to idea generation for new products;

2. Products design prototypes, production processes, and any special tooling required.

The manufacturing cycle begins...