which alternative solution will make the customer happiest?

 

B) how total costs and total revenues will change under each alternative solution

C) will the employees of the company be able to implement the change

D) how long will it take for the improvement program to be fully functional

Answer the following questions using the information below:

Tri-State Manufacturing expects to spend $800,000 in 2012 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 $80,000 in fixed appraisal costs and variable costs of $0.40 per unit of finished product. The new method involves $120,000 in training costs and an additional $160,000 in annual equipment rental. It takes two units of material for each finished product.

Internal failure costs average $160 per failed unit of finished goods. During 2011, 5% of all completed items had to be reworked. External failure costs average $400 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.

2) What is the net effect on appraisal costs for 2012, assuming the new receiving method is implemented and that 800,000 material units are received?

  

3) How much will internal failure costs change, assuming 800,000 units of materials are received and that the new receiving method reduces the amount of UNACCEPTABLE product units in the manufacturing process by 10%?

  

Answer the following questions using the information below:

LaCrosse Products has a budget of $900,000 in 2012 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $80,000 in variable costs. The new method will require $40,000 in training costs and $100,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 150,000 units.

Appraisal costs for the year are budgeted at $600,000. The new prevention procedures will save appraisal costs of $50,000. Internal failure costs average $15 per failed unit of finished goods. The internal failure rate is expected to be 3% of all completed items. The proposed changes will cut the internal failure rate by one-third. Internal failure units are destroyed. External failure costs average $54 per failed unit. The company's average external failures average 3% of units sold. The new proposal will reduce this rate by 50%. Assume all units produced are sold and there are no ending inventories.

4) What is the net change in the budget of prevention costs if the procedures are automated in 2012? Will management agree with the changes?

  

5) How much will appraisal costs change assuming the new prevention methods reduce material failures by 40% in the appraisal phase?

  

6) How much will internal failure costs change if the internal product failures are reduced by 1/3 with the new procedures?

  

A) Internal failure rate (150,000 0.03)4,500

7) How much do external failure costs change if all changes are as anticipated with the new prevention procedures? Assume all units produced are sold and there are no ending inventories.

8) Management has offered to allow the prevention changes if all changes take place as anticipated and the amounts netted are less than the cost of the equipment. What is the net impact of all the changes created by the preventive changes?

  

Answer the following questions using the information below:

Dylan Products has a budget of $1,200,000 in 2011 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $90,000 in variable costs. The new method will require $40,000 in training costs and $150,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 210,000 units.

Appraisal costs for the year are budgeted at $500,000. The new prevention procedures will save appraisal costs of $50,000. Internal failure costs average $20 per failed unit of finished goods. The internal failure rate is expected to be 4% of all completed items. The proposed changes will cut the internal failure rate by one-half. Internal failure units are destroyed. External failure costs average $48 per failed unit. The company's average external failures average 2.5% of units sold. The new proposal will reduce this rate to 1%. Assume all units produced are sold and there are no ending inventories.

9) What is the net change in the budget of prevention costs if the procedures are automated in 2011? Will management agree with the changes?

  

10) How much will appraisal costs change assuming that the new prevention methods reduce material failures by 30% in the appraisal phase?