quire $ 18,000 in training costs and $ 120,000 in annual equipment cost s. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 150,00 0 units. Appraisal costs for the year are budgeted at $ 600,000. The n ew prevention procedures will save appraisal costs of $ 30,000. Intern al failure costs average $ 15 per failed unit of finished goods. The inte rnal failure rate is expected to be 3 % of all completed items. The pro posed changes will cut the internal failure rate by onethird. Internal failure units are destroyed. External failure costs avera ge $ 54 per failed unit. The company ' s average external failures avera ge 3 % of units sold. The new proposal will reduce this rate by 50 %. Assume all units produced are sold and there are no ending inventorie s. How much will appraisal costs change, assuming the new prevention methods reduce material failures by 40 % in the appraisal phase? 23.( TCO 11) Regal Products has a budget of $ 900,000 in 20X6 for pr evention costs. If it decides to automate a portion of its prevention acti vities, it will save $ 60,000 in variable costs. The new method will req uire $ 18,000 in training costs and $ 120,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the c ost of the new equipment. The budgeted production level is 200,000 u nits. Appraisal costs for the year are budgeted at $ 600,000. The new p revention procedures will save appraisal costs of $ 30,000. Internal fail ure costs average $ 15 per failed unit of finished goods. The internal fa ilure rate is expected to be 3 % of all completed items. The proposed c hanges will cut the internal failure rate by onethird. Internal failure units are destroyed. External failure costs 24.( TCO 12) Obsolescence is an example of which cost category? 25.( TCO 12) Liberty Celebrations, Inc. manufactures a line of flags. The annual demand for its flag display is estimated to be 100,000 unit s. The annual cost of carrying one unit in inventory is $ 1.60, and the cost to initiate a production run is $ 100. There are no flag displays on hand but Liberty had scheduled 70 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 instan taneous.