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Premier Corp expects to spend $800,200 in 2017 in appraisal costs if it does not change its incoming materials inspection method. If it decides to
Premier Corp expects to spend $800,200 in 2017 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 $60,700 in fixed appraisal costs and variable costs of $0.50 per unit of finished product. The new method involves $140,100 in training costs and an additional $150, 100 in annual equipment rental. Internal failure costs average $240 per failed unit of finished goods. During 2016, 4% of all completed items had to be reworked. External failure costs average $440 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 would be the change in the external failure budget, if 601,000 units are used and assuming external failures are reduced by 12%. O A. $304,076 decrease OB. $317,328 decrease O C. $32,008 increase OD. $250,000 decrease
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