Question
Premier Corp expects to spend? $801,000 in 2017 in appraisal costs if it does not change its incoming materials inspection method. If it decides to
Premier Corp expects to spend? $801,000 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? $60,300 in fixed appraisal costs and variable costs of? $0.50 per unit of finished product.
The new method involves? $150,000 in training costs and an additional? $157,000 in annual equipment rental. Internal failure costs average? $180 per failed unit of finished goods. During? 2014, 4% of all completed items had to be reworked. External failure costs average? $400 per failed unit. The? company's average external failures are? 3% 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. How much will external failure costs change assuming? 810,000 units of materials are received and that product failures with customers are cut in half with the new receiving? method?
A. ?$9,720,000 decrease
B. ?$16,020 increase
C. ?$2,187,000 decrease
D. ?$4,860,000 decrease
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