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The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $187 with a resulting contribution margin of $78.

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The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $187 with a resulting contribution margin of $78. Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $38,500 a year to inspect the CD players. An average of 2,100 units turn out to be defective - 1,680 of them are detected in the inspection process and are repaired for $80. If a defective CD player is not identified in the inspection process, the customer who receives it is given a full refund of the purchase price. The proposed quality control system involves the purchase of an X-ray machine for $180,000. The machine would last for five years and would have salvage value at that time of $18,000 Brisbane would also spend $470,000 immediately to train workers to better detect and repair defective units. Annual inspection costs would increase by $21,000. This new control system would reduce the number of defective units to 400 per year. 345 of these defective units would be detected and repaired at a cost of $46 per unit. Customers who still received detective players would be given a refund equal to 120% of the purchase price. Questions 1 & 2 (0 points; unlimited tries] 1. What is the Year 2 cash flow if Brisbane keeps using its current system? 2514.40 Submit Answer Incorrect. Tries 4/99 Previous Tries 2. What is the Year 2 cash flow if Brisbane replaces its current system? 113035 Submit Answer Incorrect. Tries 2/99 Previous Tries Questions 3 & 4[5 points each, Stries each) (NOTE: When computing present values, use the present value factors from the tables on page 118 in the Coursepack) 3. Assuming a discount rate of 6%, what is the net present value of Brisbane keeps using its current system? Submit Answer Tries 0/5 4. Assuming a discount rate of 6%, what is the net present value in Brisbane replaces its current system? Thae /S

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