Use the Information Below to Answer the Following Question(s)

question 236

Multiple Choice

Use the information below to answer the following question(s) .Dylan Products has a budget of $1,200,000 in 2018 for prevention costs.If it decides to automate a portion of its prevention activities, it will save $90,000 in variable costs.The new method will require $40,000 in training costs and $150,000 in annual equipment costs.Management is willing to adjust the budget for an amount up to the cost of the new equipment.The budgeted production level is 210,000 units.Appraisal costs for the year are budgeted at $500,000.The new prevention procedures will save appraisal costs of $50,000.Internal failure costs average $20 per failed unit of finished goods.The internal failure rate is expected to be 4% of all completed items.The proposed changes will cut the internal failure rate by one-half.Internal failure units are destroyed.External failure costs average $48 per failed unit.The company's average external failures average 2.5% of units sold.The new proposal will reduce this rate to 1%.Assume all units produced are sold and there are no ending inventories.
-What is the net change in the budget of prevention costs if the procedures are automated in 2018? Will management agree with the changes?

• A)$100,000 decrease, yes
• B)$90,000 decrease, yes
• C)$190,000 increase, no
• D)$100,000 increase, yes
• E)$90,000 increase, no

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Definitions:

Action Potentials

Electrical impulses that are the means by which information is transmitted along neurons and muscle cells.

All-Or-None

The All-Or-None principle is a rule stating that the strength of a response of a nerve or muscle fiber is not dependent on the strength of the stimulus; if the stimulus exceeds the threshold, a complete response is generated.

Non-Decremental Fashion

Describes a process that does not decrease or diminish in size, importance, or intensity over time or distance.

Strength of Stimulus

A parameter that influences the magnitude of a physiological response, where greater stimuli typically induce stronger responses.