SarahLou Company had sales of $2,500,000 for last year. Data on quality-related costs for last year are as follows: $$\begin{array} { l r }
\text { Inspection } & \$ 80,000 \
\text { Scrap } & 10,000 \
\text { Rework } & 45,000 \
\text { Quality training } & 20,000 \
\text { Warranty work } & 100,000 \
\text { Customer complaints } & 30,000
\end{array}$$ A. Classify each of the quality-related costs as control (prevention and appraisal), internal failure, or external failure.
B. What percentage of sales is accounted for by quality-related costs?
C. If quality-related costs could be reduced to 2% of sales, by how much would SarahLou's profit increase?

Question

SarahLou Company had sales of $2,500,000 for last year. Data on quality-related costs for last year are as follows: $$\begin{array} { l r } 
\text { Inspection } & \$ 80,000 \
\text { Scrap } & 10,000 \
\text { Rework } & 45,000 \
\text { Quality training } & 20,000 \
\text { Warranty work } & 100,000 \
\text { Customer complaints } & 30,000
\end{array}$$ A. Classify each of the quality-related costs as control (prevention and appraisal), internal failure, or external failure.
B. What percentage of sales is accounted for by quality-related costs?
C. If quality-related costs could be reduced to 2% of sales, by how much would SarahLou's profit increase?

Quizplus · Accepted Answer

The Answer of SarahLou Company had sales of $2,500,000 for last year. Data on quality-related costs for last year are as follows: $$\begin{array} { l r } 
\text { Inspection } & \$ 80,000 \
\text { Scrap } & 10,000 \
\text { Rework } & 45,000 \
\text { Quality training } & 20,000 \
\text { Warranty work } & 100,000 \
\text { Customer complaints } & 30,000
\end{array}$$ A. Classify each of the quality-related costs as control (prevention and appraisal), internal failure, or external failure.
B. What percentage of sales is accounted for by quality-related costs?
C. If quality-related costs could be reduced to 2% of sales, by how much would SarahLou's profit increase?

SarahLou Company Had Sales of $2,500,000 for Last Year A Classify Each of the Quality-Related Costs as Control (Prevention