Answer the Following Questions Using the Information Below

question 19

Multiple Choice

Answer the following questions using the information below:
Barossa Manufacturing expects to spend $500 000 in 2018 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 $50 000 in fixed appraisal costs and variable costs of $0.50 per unit of finished product.The new method involves $70 000 in training costs and an additional $170 000 in annual equipment rental.It takes four units of material for each finished product.
Internal failure costs average $80 per failed unit of finished goods.During 2013,5% of all completed items had to be reworked.External failure costs average $200 per failed unit.The company's average external failures is 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.
-How much will external failure costs change assuming 800 000 units of materials are received and that product failures with customers are cut in half with the new receiving method?

• A)$500 000 decrease
• B)$200 000 decrease
• C)$10 000 increase
• D)$320 000 decrease

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Innovations that result in new or improved goods or services.

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