Cysco Corp has a budget of $1,200,000 in 2017 for prevention costs. If it decides to automate aportion of its prevention activities, it will save $103,000 in variable costs. The new method willrequire $51,000 in training costs and $148,000 in annual equipment costs. Management is willing toadjust the budget for an amount up to the cost of the new equipment. The budgeted production levelis 207,000 units.Appraisal costs for the year are budgeted at $508,000. The new preventionprocedures will save appraisal costs of $50,000. Internal failure costs average $34per failed unit of finished goods. The internal failure rate is expected to be 5% of allcompleted items. The proposed changes will cut the internal failure rate by one-half.Internal failure units are destroyed. External failure costs average $52 per failed unit. The company'saverage external failures average 4.5% of units sold. The new proposal will reduce this rate to 1%.Assume all units produced are sold and there are no ending inventories. Management has offered to allow the prevention changes if all changes take place asanticipated and the amounts netted are less than the cost of the equipment. What isthe net impact of all the changes created by the preventive changes? Assume thatinternal product failures are reduced by 45% with the new procedures.$(465,540)$(254,000)$(489,095)$(215,280)

These are costs incurred to prevent the future loss in terms of quality control.

Cysco Corp has a budget of $1,200,000 in 2017 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $103,000 in variable costs. The new method will require $51,000 in training costs and $148,000 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 207,000 units.

Cysco Corp has a budget of $1,200,000 in 2017 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $103,000 in variable costs. The new method will require $51,000 in training costs and $148,000 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 207,000 units.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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