At the beginning of the year, Bing 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, Bing's managers collected the following data for the current and preceding year:
Required:

a.
Compute prevention costs, appraisal costs, internal failure costs, and external failure costs as a percentage of sales for the preceding year and the current year.
b.
How much has profit increased as a result of quality improvements?
c.
If quality costs can be reduced even further to 2.5 percent of sales, how much additional profit would result?

Question

At the beginning of the year, Bing 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, Bing's managers collected the following data for the current and preceding year:
Required:
  
a.
Compute prevention costs, appraisal costs, internal failure costs, and external failure costs as a percentage of sales for the preceding year and the current year.
b.
How much has profit increased as a result of quality improvements?
c.
If quality costs can be reduced even further to 2.5 percent of sales, how much additional profit would result?

Quizplus · Accepted Answer

The Answer of At the beginning of the year, Bing 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, Bing's managers collected the following data for the current and preceding year:
Required:
  
a.
Compute prevention costs, appraisal costs, internal failure costs, and external failure costs as a percentage of sales for the preceding year and the current year.
b.
How much has profit increased as a result of quality improvements?
c.
If quality costs can be reduced even further to 2.5 percent of sales, how much additional profit would result?

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