At the beginning of the year, Andrew Company 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: For the current year, prevention costs are what percentage of sales?

A) 9.00%
B) 8.25%
C) 7.00%
D) 2.00%

Question

At the beginning of the year, Andrew Company 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: For the current year, prevention costs are what percentage of sales?
At the beginning of the year, Andrew Company 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: For the current year, prevention costs are what percentage of sales? A) 9.00% B) 8.25% C) 7.00% D) 2.00%

A) 9.00% 
B) 8.25% 
C) 7.00% 
D) 2.00%

Quizplus · Accepted Answer

To calculate the prevention cost as a percentage of sales, we need to use the formula:

Prevention costs / Sales = Prevention costs as a percentage of sales

From the table, we can see that prevention costs for the current year are $60,000 and sales are $3,000,000.

Therefore,

Prevention costs as a percentage of sales = (60,000 / 3,000,000) x 100% = 2.00%

Thus, the answer is D, 2.00%.

At the Beginning of the Year, Andrew Company Initiated a Quality