QC Corp has the following budget amounts for the current year: $1,100,000 for prevention costs and $880,000 for appraisal costs. Internal failure equals $100 per failed item and external failure has a total budget of $660,000. The Product Testing department has proposed a new method of testing products. If management decides to implement the new method, $2.20 per unit of appraisal costs will be saved, up to a level of 150,000 tests. No additional savings are expected past the 150,000 level. The new method involves $104,500 in training costs and $71,500 in yearly testing supplies. If the new testing method is implemented what is the revised budget for appraisal costs, assuming 550,000 units are tested during the current year?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
QC Corp has the following budget amounts for the current year: $1,100,000 for prevention costs and $880,000 for appraisal costs. Internal failure equals $100 per failed item and external failure has a total budget of $660,000.
The Product Testing department has proposed a new method of testing products. If management decides to implement the new method, $2.20 per unit of appraisal costs will be saved, up to a level of 150,000 tests. No additional savings are expected past the 150,000 level. The new method involves $104,500 in training costs and $71,500 in yearly testing supplies.
If the new testing method is implemented what is the revised budget for appraisal costs, assuming 550,000 units are tested during the current year?
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