Question 5 . Question : ( TCO 11 ) Regal Products has a budget of $ 900,000 in 20X3 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 costs . Management is willing to adjust the budget for an amount up to the cost of the new equipment . The budgeted production level is 150,000 units . Appraisal costs for the year are budgeted at $ 600,000 . The new prevention procedures will save appraisal costs of $ 30,000 . Internal 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 one-third . Internal failure units are destroyed . External failure costs average $ 54 per failed unit . The company ' s average external failures average 3 % of units sold . The new proposal will reduce this rate by 50 %. Assume that all units produced are sold and there are no ending inventories . How much will appraisal costs change assuming the new prevention methods reduce material failures by 40 % in the appraisal phase ? Question 6 . Question : ( TCO 12 ) Which of the following categories of costs are important when managing inventories of goods for sale , according to the authors of the text ? Question 7 . Question : ( TCO 12 ) The costs associated with storage are an example of which cost category ? Question 8 . Question : ( TCO 12 ) Which of the following statements about the economic-order-quantity decision model is FALSE ? Question 9 . Question : ( TCO 12 ) The _____ describes the flow of goods , services , and information from the initial sources of materials and services to the delivery of products to consumers . Question 10 . Question : ( 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 $ 40 . 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