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Answer the Following Questions Using the Information Below

question 62

Multiple Choice

Answer the following questions using the information below:
LaCrosse Products has a budget of $900,000 in 2015 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $80,000 in variable costs. The new method will require $40,000 in training costs and $100,000 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 150,000 units.
Appraisal costs for the year are budgeted at $600,000. The new prevention procedures will save appraisal costs of $50,000. Internal failure costs average $15 per failed unit of finished goods. The internal failure rate is expected to be 3% of all completed items. The proposed changes will cut the internal failure rate by one-third. Internal failure units are destroyed. External failure costs average $54 per failed unit. The company's average external failures average 3% of units sold. The new proposal will reduce this rate by 50%. Assume all units produced are sold and there are no ending inventories.
-How much do external failure costs change if all changes are as anticipated with the new prevention procedures? Assume all units produced are sold and there are no ending inventories.

Definitions:

Small Talk

Casual conversation about unimportant or uncontroversial matters, often used in social settings.

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A plan for carrying out a process or procedure, giving lists of intended events and times.

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The act of looking directly into another person’s eyes, which can convey honesty, confidence, or aggression, depending on the context.

Paralegals

Trained legal assistants who support lawyers by completing various tasks such as conducting legal research, managing documents, and drafting legal documents, but are not licensed attorneys.