At the beginning of the year, Grant 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: As a result of quality improvements, profits have increased by

A) £97,500.
B) £61,500.
C) £22,500.
D) £15,000.

Question

At the beginning of the year, Grant 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: As a result of quality improvements, profits have increased by
At the beginning of the year, Grant 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: As a result of quality improvements, profits have increased by A) £97,500. B) £61,500. C) £22,500. D) £15,000.

A) £97,500. 
B) £61,500. 
C) £22,500. 
D) £15,000.

Quizplus · Accepted Answer

To calculate the increase in profits, we need to take the difference between the profits of the current year and the preceding year. 
Increase in profits = Current year profits - Preceding year profits
= (£885,000 - £824,000) 
= £61,000 
Since the question asks for the increase in profits due to quality improvements, we can assume that the £500 reduction in scrap and rework costs is included in the current year profits. 
Therefore, the increase in profits due to quality improvements is 
= £61,000 - £500 
= £60,500 
which is closest to answer choice B (£61,500).

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