Dylan Products has a budget of $1,200,000 in 2015 for preventioncosts. If it decides to automate a portion of its preventionactivities, it will save $90,000 in variable costs. The new methodwill require $40,000 in training costs and $150,000 in annualequipment costs. Management is willing to adjust the budget for anamount up to the cost of the new equipment. The budgeted productionlevel is 210,000 units.
Appraisal costs for the year are budgeted at $500,000. The newprevention procedures will save appraisal costs of $50,000.Internal failure costs average $20 per failed unit of finishedgoods. The internal failure rate is expected to be 4% of allcompleted items. The proposed changes will cut the internal failurerate by one-half. Internal failure units are destroyed. Externalfailure costs average $48 per failed unit. The company's averageexternal failures average 2.5% of units sold. The new proposal willreduce this rate to 1%. Assume all units produced are sold andthere are no ending inventories.
How much will appraisal costs change assuming that the newprevention methods reduce material failures by 30% in the appraisalphase?
Select one:
A. $84,000 decrease
B. $150,000 decrease
C. $50,000 decrease
D. $229,000 decrease
E. $50,000 increase
2 .The Taranto Company uses the high-low method to estimate it'scost function. The information for the current year is providedbelow:
| Machine-hours | Costs |
| Highest observation of costdriver | 2,000 | $225,000 |
| Lowest observation of costdriver | 1,000 | $125,000 |
What is the constant for the estimating cost equation?
Select one:
A. $12,500
B. $125,000
C. $25,000
D. $225,000
E. $0
Hello,
Are you able to show the work for both questions?
Thanks,
