Answer the Following Questions Using the Information Below

question 122

Multiple Choice

Answer the following questions using the information below:
Dylan Products has a budget of $1,200,000 in 2011 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.
-Examples of nonfinancial measures of quality include the:

• A)percentage of defective units shipped to customers as a percentage of total units shipped
• B)number of customer complaints
• C)percent of products that experience early or excessive failure
• D)All of these answers are correct.

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Definitions:

Master Budget

The master budget is a comprehensive financial planning document that consolidates all of a company's individual budgets relating to sales, costs, operations, and capital.

Product

Any item or service offered to the market for consumption, use, or acquisition.

Merchandise Inventory

Goods that a company holds for the purpose of selling to customers in the ordinary course of business.

Monthly Depreciation

The portion of a fixed asset's cost allocated as an expense over a single month, reflecting the asset's decrease in value over time.