where does the amount of $80 in the response feedback come from and how was that calculated?
X Versailles Manufacturing Company spent $380,000 in 2018 to inspect incoming components. Of the $380,000 $250,000 is fixed appraisal costs. The variable inspection cost is $0.25 per component. It takes four components for each finished product. Internal failure costs average $90 per failed unit of finished goods. In 2018, three percent of all completed items had to be reworked. External failure costs average $250 per failed unit. The company's average external failures are five percent of units sold. The company manufactures all units as ordered and carries no materials inventories. Seeking to decrease its total cost of quality (COQ). Versailles contracted Quality Consultants, Inc. (QCI) to study ways to improve product quality and to reduce costs. Upon completion of the study, QC recommended automatic inspection equipment that requires a $70,000 annual cost for training and $230,000 for equipment rental and maintenance. The new equipment will eliminate $60,000 of the fixed appraisal costs, reduce the amount of unacceptable product units in the manufacturing process by 15 percent, and cut product failures by 33%. The company paid the consulting firm $130,000 in early January 2019 for the project. Versailles expects no changes in its operating level in the foreseeable future. How much are internal failure costs projected to change? Selected Answer $160,000 decrease. Answers: $160,000 decrease $351.000 decrease $52,650 decrease $320,000 decrease $80,000 decrease. Response Feedback: 1. No. of finished units with internal failures in 2018 - 130,000 finished units * 0.05 - 3,900. 2. No. of finished units with internal failures in 2019 = 3,900 X (1 - 0.15) = 3,315. 3. Projected internal failure costs in 2019 = 3,315 * $90 = $298,350. 4. Internal failure costs in 2018 - 3,900 $80 = $351,000 5. Projected change in internal failure costs $351,000 - $298,350 = $52,650 decrease X Versailles Manufacturing Company spent $380,000 in 2018 to inspect incoming components. Of the $380,000 $250,000 is fixed appraisal costs. The variable inspection cost is $0.25 per component. It takes four components for each finished product. Internal failure costs average $90 per failed unit of finished goods. In 2018, three percent of all completed items had to be reworked. External failure costs average $250 per failed unit. The company's average external failures are five percent of units sold. The company manufactures all units as ordered and carries no materials inventories. Seeking to decrease its total cost of quality (COQ). Versailles contracted Quality Consultants, Inc. (QCI) to study ways to improve product quality and to reduce costs. Upon completion of the study, QC recommended automatic inspection equipment that requires a $70,000 annual cost for training and $230,000 for equipment rental and maintenance. The new equipment will eliminate $60,000 of the fixed appraisal costs, reduce the amount of unacceptable product units in the manufacturing process by 15 percent, and cut product failures by 33%. The company paid the consulting firm $130,000 in early January 2019 for the project. Versailles expects no changes in its operating level in the foreseeable future. How much are internal failure costs projected to change? Selected Answer $160,000 decrease. Answers: $160,000 decrease $351.000 decrease $52,650 decrease $320,000 decrease $80,000 decrease. Response Feedback: 1. No. of finished units with internal failures in 2018 - 130,000 finished units * 0.05 - 3,900. 2. No. of finished units with internal failures in 2019 = 3,900 X (1 - 0.15) = 3,315. 3. Projected internal failure costs in 2019 = 3,315 * $90 = $298,350. 4. Internal failure costs in 2018 - 3,900 $80 = $351,000 5. Projected change in internal failure costs $351,000 - $298,350 = $52,650 decrease
