Answer the Following Questions Using the Information Below

question 108

Multiple Choice

Answer the following questions using the information below:
Tri-State Manufacturing expects to spend $800,000 in 2012 in appraisal costs if it does not change its incoming materials inspection method. If it decides to implement a new receiving method, it will save $80,000 in fixed appraisal costs and variable costs of $0.40 per unit of finished product. The new method involves $120,000 in training costs and an additional $160,000 in annual equipment rental. It takes two units of material for each finished product.
Internal failure costs average $160 per failed unit of finished goods. During 2011, 5% of all completed items had to be reworked. External failure costs average $400 per failed unit. The company's average external failures are 1% of units sold. The company carries no ending inventories, because all jobs are on a per order basis and a just-in-time inventory ordering method is used.
-Companies that use manufacturing lead time as the base for allocating manufacturing costs to products consider that it has the following benefit(s) :

• A)Managers are motivated to reduce the time taken to manufacture products.
• B)Total overhead costs decrease.
• C)Operating income rises.
• D)All of these answers are correct.

---

Definitions:

Tangible Benefit

A clear and measurable advantage or gain, often relating to physical or financial items that can be directly observed or quantified.

Preserve Relationship

Efforts or actions taken to maintain and protect the quality and stability of a professional or personal relationship.

Face-To-Face Delivery

The process of presenting information or communicating directly with another person in the same physical space.

Nonverbal Cues

Communication methods not involving words, such as gestures, body language, and facial expressions, that convey meaning.