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Answer the Following Questions Using the Information Below

question 59

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.
-How much will internal failure costs change if the internal product failures are reduced by 50% with the new procedures?

Definitions:

Wagner Act

A foundational statute in United States labor law which guarantees basic rights of private sector employees to organize into trade unions, engage in collective bargaining, and take collective action such as strikes.

Taft-Hartley Act

A United States federal law that restricts the activities and power of labor unions.

Health Care Organizations

Entities that provide medical services, support, and information to patients and can include hospitals, clinics, and insurance companies.

Union Representation

The act of labor unions representing the interests of workers in negotiations with employers regarding wages, working conditions, benefits, and other employment terms.