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:

Virtual Meetings

Online gatherings facilitated through internet-based platforms, allowing participants to communicate and collaborate from different locations.

Travel Costs

Expenses associated with traveling for business or personal reasons, including transportation, lodging, and meals.

Employee Fatigue

Employee fatigue refers to a state of extreme tiredness or exhaustion experienced by employees, often resulting from long hours, intense workloads, or stress.

Purpose

The reason for which something exists or is done, made, or used.