Design Products is committed sound quality pro is available to its quality program. It works with all areas of the company to establish grams within reasonable budget guidelines. For 2016, the following budget information Prevention Cost Internal Failure Cost $120 per failed item External Failure Cost $900,000 $1,000,000 Appraisal Cost $840,000 *4% of produced units require rework at the $120 rate. A new method for product testing has been proposed for 2016. Design Products has always treated testing as part of appraisal costs. If management decides to implement the new method, $2.50 per unit of appraisal costs will be saved, up to a level of 160,000 tests. No additional savings will happen past the 160,000 level. The new testing method involves $120,000 in training costs and $80,000 in new supplies

Required: 1. What is the adjusted budget for appraisal costs, assuming the new method is implemented and 800,000 units are tested during the manufacturing process in 2016?

2. How much do total internal failure costs change, assuming 700,000 units are completed and then tested under the new method, and it reduces the amount of unacceptable units in the manufacturing process by 40%. Notice the internal failure cost per unit has not changed with the new method.