At the beginning of the year, Jim Jackson initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years:
$\begin{array}{lrr}
&\underline{\text { Preceding Year }} &
\underline{\text { Current Year}}\
\text { Sales } & \$ 2,400,000 & \$ 2,000,000 \
\text { Scrap } & 40,000 & 30,000 \
\text { Rework } & 100,000 & 70,000 \
\text { Product inspection } & 12,000 & 18,000 \
\text { Quality training } & 4,000 & 5,000 \
\text { Material inspections } & 8,000 & 13,000 \
\text { Product warranty } & 80,000 & 50,000
\end{array}$

-Refer to the figure.As a result of quality improvements,by how much have profits increased?

Question

At the beginning of the year, Jim Jackson initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years:
$\begin{array}{lrr}
&\underline{\text { Preceding Year }} &
\underline{\text { Current Year}}\
\text { Sales } & \$ 2,400,000 & \$ 2,000,000 \
\text { Scrap } & 40,000 & 30,000 \
\text { Rework } & 100,000 & 70,000 \
\text { Product inspection } & 12,000 & 18,000 \
\text { Quality training } & 4,000 & 5,000 \
\text { Material inspections } & 8,000 & 13,000 \
\text { Product warranty } & 80,000 & 50,000
\end{array}$

-Refer to the figure.As a result of quality improvements,by how much have profits increased?

Quizplus · Accepted Answer

To calculate the increase in profits due to quality improvements, we need to compare the total costs related to quality in the preceding year with those in the current year. The costs include scrap, rework, product inspection, quality training, material inspections, and product warranty.Preceding Year Total Costs = $40,000 (Scrap) + $100,000 (Rework) + $12,000 (Product inspection) + $4,000 (Quality training) + $8,000 (Material inspections) + $80,000 (Product warranty) = $244,000.Current Year Total Costs = $30,000 (Scrap) + $70,000 (Rework) + $18,000 (Product inspection) + $5,000 (Quality training) + $13,000 (Material inspections) + $50,000 (Product warranty) = $186,000.The difference in costs (increase in profits) = $244,000 (Preceding Year) - $186,000 (Current Year) = $58,000.

At the Beginning of the Year, Jim Jackson Initiated a Quality