The following information pertains to Taft, Inc., for the current year:
$\begin{array}{lr}
\text { Sales } & \$ 20,000,000 \
\text { Internal failure costs } & 600,000 \
\text { External failure costs } & 400,000 \
\text { Appraisal costs } & 250,000 \
\text { Prevention costs } & 100,000 \
\text { Cost of goods sold } & 10,000,000
\end{array}$

-Refer to the figure.Quality costs are what percentage of sales?

Question

The following information pertains to Taft, Inc., for the current year:
$\begin{array}{lr}
\text { Sales } & \$ 20,000,000 \
\text { Internal failure costs } & 600,000 \
\text { External failure costs } & 400,000 \
\text { Appraisal costs } & 250,000 \
\text { Prevention costs } & 100,000 \
\text { Cost of goods sold } & 10,000,000
\end{array}$

-Refer to the figure.Quality costs are what percentage of sales?

Quizplus · Accepted Answer

Quality costs include internal failure costs, external failure costs, appraisal costs, and prevention costs. Adding these together: $600,000 + $400,000 + $250,000 + $100,000 = $1,350,000. To find the percentage of sales, divide the total quality costs by sales: $1,350,000 / $20,000,000 = 0.0675 or 6.75%.

The Following Information Pertains to Taft, Inc -Refer to the Figure