What is the net present value of the investment ? Would the company want to purchase the new machine ? Income taxes are not considered . ( Points : 5 )
22 . ( TCO 11 ) The four cost categories in a cost of quality program ar e ( Points : 5 ) 23 . ( TCO 11 ) Regal Products has a budget of $ 900,000 in 20X6 for prevention costs . If it decides to automate a portion of its prevention activities , it will save $ 60,000 in variable costs . The new method will require $ 18,000 in training costs and $ 120,000 in annual equipment c osts . Management is willing to adjust the budget for an amount up to the cost of the new equipment . The budgeted production level is 200 , 000 units . Appraisal costs for the year are budgeted at $ 600,000 . Th e new prevention procedures will save appraisal costs of $ 30,000 . Int ernal 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 onethird . Internal failure units are destroyed . External failure costs aver age $ 54 per failed unit . The company ' s average external failures aver age 3 % of units sold . The new proposal will reduce this rate by 50 %. Assume all units produced are sold and there are no ending inventori es . How much will internal failure costs change if the internal product fai lures are reduced by 50 % with the new procedures ? ( Points : 5 )
24 . ( TCO 12 ) The costs associated with storage are an example of whi ch cost category ? ( Points : 5 ) 25 . ( TCO 12 ) Liberty Celebrations , Inc ., manufactures a line of flags . The annual demand for its flag display is estimated to be 100,000 uni ts . The annual cost of carrying one unit in inventory is $ 1.60 , and the cost to initiate a production run is $ 60 . There are no flag displays on hand but Liberty had scheduled 60 equal production runs of the displ ay sets for the coming year , the first of which is to be run immediately . Liberty Celebrations has 250 business days per year . Assume that s ales occur uniformly throughout the year and that production is insta ntaneous .