Pollenti Company has just merged with another industrial firm whose business had been failing. Pollenti immediately conducted a thorough study of the new company's work processes, and produced a report including the data shown below:
• A new inspection process is recommended to minimize defective raw materials. It would cost $12,000 to implement.
• Shoddy business practices are resulting in excessive warranty costs $15,000 more than normal due mainly to material failure.
• Reengineering of the assembly line will increase productivity. It would cost $18,000 to implement.
• Inefficient workplace design is costing $5,000 in unnecessary rework costs.
• Estimated amount of lost profits due to dissatisfied customers who turn to the competition is $80,000.
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Based on the above, what is the amount of appraisal costs, if any, included here?
A) $18,000
B) $12,000
C) $15,000
D) Zero

Question

Pollenti Company has just merged with another industrial firm whose business had been failing. Pollenti immediately conducted a thorough study of the new company's work processes, and produced a report including the data shown below:
• A new inspection process is recommended to minimize defective raw materials. It would cost $12,000 to implement.
• Shoddy business practices are resulting in excessive warranty costs $15,000 more than normal due mainly to material failure.
• Reengineering of the assembly line will increase productivity. It would cost $18,000 to implement.
• Inefficient workplace design is costing $5,000 in unnecessary rework costs.
• Estimated amount of lost profits due to dissatisfied customers who turn to the competition is $80,000.
- 
Based on the above, what is the amount of appraisal costs, if any, included here?
A) $18,000
B) $12,000
C) $15,000
D) Zero

Quizplus · Accepted Answer

Appraisal costs are expenses tied to the detection of defective products before they are shipped to customers. The $12,000 for implementing a new inspection process to minimize defective raw materials is an example of appraisal costs, as it is aimed at evaluating the quality of materials to prevent defects.

Pollenti Company Has Just Merged with Another Industrial Firm Whose