Question

Freesia Products han a current your budget of $100.000 for prevention costs Freesia in camidering the automation of comprendonctivities swing 892.000 in the prevention cons. The new method with $44.000 in training cents and 575.000 woment costs. The hugeted production is 72,500 unts Appraisal costs for the year are budgeted at $600,000. The new prevention procedures will save appel costs of $50,000. temature coverage 515 perated unit. The internal store te is expected to be of all units. The proposed charges will be intama tahurerate by one third Intematolure unts are destroyed mature coverage 54 per failed unit. The company temat we ate is 100% of units sold. The new proposal wil reduce the external failurerate by SO How much do sterowe co change changes tipated with the premium lished goods units produced area and there is no beginning or ending inventories Multiple Choice $130725 1200725 52450 450

Answer 1

Solution: $139,725

Working:

External failure costs (172,500 × 0.03 × $54)	279450
Multiply: Saving rate	0.5
Change in external failure costs	139725