Premier Corp expects to spend $800,100 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 $60,800 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 $150,100 in annual equipment rental.

Internal failure costs average $190 per failed unit of finished goods. During 2019, 4% of all completed items had to be reworked. External failure costs average $500 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

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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?

Question content area bottom

Part 1

A.

$291,100 decrease

B.

$1,520 increase

C.

$4,001 increase

D.

$169,750 decrease