Answer the Following Questions Using the Information Below

question 128

Multiple Choice

Answer the following questions using the information below:
Strykerz Corp expects to spend $800,000 in 2015 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 $60,000 in fixed appraisal costs and variable costs of $0.50 per unit of finished product. The new method involves $140,000 in training costs and an additional $150,000 in annual equipment rental.
Internal failure costs average $160 per failed unit of finished goods. During 2014, 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.
-What is the net effect on appraisal costs for 2015,assuming the new receiving method is implemented and that 800,000 material units are received?

• A) $120,000 increase
• B) $170,000 decrease
• C) $190,000 decrease
• D) $400,000 increase

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Definitions:

Birth Rate

A statistical measure representing the number of live births per 1,000 people in a population per year.

Unintended Consequences

Outcomes that are not anticipated or intended, often as a result of an action or a series of actions that diverge from the original objectives.

Base Pairs

Units of double-stranded DNA consisting of two nucleotides located on opposite complementary DNA or RNA strands that are connected via hydrogen bonds.

Amino Acids

Organic compounds that combine to form proteins, serving as the building blocks of life.