internal product failures are reduced by 50 % with the new procedures? 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 units. The annual cost of carrying one unit in inventory is $ 1.60, and the cost to initiate a production run is $ 30. There are no flag displays on hand but Liberty had scheduled 60 equal production runs of the display sets for the coming year, the first of which is to be run immediately. Liberty Celebrations has 250 business days per year. Assume that sales occur uniformly throughout the year and that production is instantaneous. If Liberty Celebrations does not maintain a safety stock, the estimated total carrying cost for the flag displays for the coming year is the estimated total setup cost for the flag displays for the coming year is( Points: 5)( TCO 5) Robert ' s Medical Equipment Company manufactures hospital beds. Its most popular model, Deluxe, sells for $ 5,000. It has variable costs totaling $ 2,800 and fixed costs of $ 1,000 per unit, based on an average production run of 5,000 units. It normally has four production runs a year, with $ 400,000 in setup costs each time. Plant capacity can handle up to six runs a year for a total of 30,000 beds. A competitor is introducing a new hospital bed similar to Deluxe that will sell for $ 4,000. Management believes it must lower the price to compete. Marketing believes that the new price will increase sales by 25 % a year. The plant manager thinks that production can increase by 25 % with the same level of fixed costs. The company currently sells all the Deluxe beds it can produce. Question 1: What is the annual operating income from Deluxe at the current price of $ 5,000? Question 2: What is the annual operating income from Deluxe if the price is reduced to $ 4,000 and sales in units increase by 25 %? Sales( 25,000 x $ 4,000) $ 100,000,000( TCO 7) Grace Greeting Cards Incorporated is starting a new business venture and are in the process of evaluating its product lines. Information for one new product, traditional parchment grade cards, is as follows: