Answer the Following Questions Using the Information Below

question 119

Multiple Choice

Answer the following questions using the information below:
Mildura 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 $75 000 in variable costs.The new method will require $24 000 in training costs and $145 000 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 $35 000.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.
-Management has offered to allow the prevention changes if all changes take place as anticipated and the amounts netted are less than the cost of the equipment.What is the net impact of all the changes created by the preventive changes?

• A)$(125 200)
• B)$(176 200)
• C)$176 200
• D)$(270 200)

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Definitions:

Oral Care

The practice of keeping the mouth, teeth, and gums clean and healthy to prevent disease.

Surgical Mask

A medical device worn over the mouth and nose to prevent the spread of infectious agents during surgical procedures and patient care.

Normal Flora

The collection of microorganisms including bacteria, viruses, and fungi that reside on or within the body but do not cause disease under normal circumstances.

Tapeworm

A parasitic flatworm, often ingested by humans or animals from infected food, leading to various health problems.