Premier Corp expects to spend $800,000 in 2020 in appraisal costs if it does not...
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Premier Corp expects to spend $800,000 in 2020 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 $60,600 in fixed appraisal costs and variable costs of $0.50 per materials units received. The new method involves $141,000 in training costs and an additional $150,400 in annual equipment rental.
Internal failure costs average $160 per failed unit of finished goods. During 2019, 5% of all completed items had to be reworked. External failure costs average $410 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 2020, assuming the new receiving method is implemented and that 800,100 material units are received?
a. $4,000 decrease
b. $169,250 decrease
c $1242 increase
d $ 291,400 increase
Premier Corp expects to spend $800,000 in 2020 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 $60,600 in fixed appraisal costs and variable costs of $0.50 per materials units received. The new method involves $141,000 in training costs and an additional $150,400 in annual equipment rental.
Internal failure costs average $160 per failed unit of finished goods. During 2019, 5% of all completed items had to be reworked. External failure costs average $410 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 2020, assuming the new receiving method is implemented and that 800,100 material units are received?
a. $4,000 decrease
b. $169,250 decrease
c $1242 increase
d $ 291,400 increase
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