Internal reports on quality at the Acme Publishing Company generated the following information for the Trade Division for the first three months of the year: $\begin{array}{lr}
\text { Total sales } & \$ 1,000,000 \
\text { Costs of quality: } & \
\text { Prevention } & 44,000 \
\text { Appraisal } & 47,000 \
\text { Internal failure } & 36,000 \
\text { External failure } & 64,000
\end{array}$
Compute the ratio of costs of conformance to total costs of quality.

Question

Internal reports on quality at the Acme Publishing Company generated the following information for the Trade Division for the first three months of the year: $\begin{array}{lr}
\text { Total sales } & \$ 1,000,000 \
\text { Costs of quality: } & \
\text { Prevention } & 44,000 \
\text { Appraisal } & 47,000 \
\text { Internal failure } & 36,000 \
\text { External failure } & 64,000
\end{array}$ 
Compute the ratio of costs of conformance to total costs of quality.

Quizplus · Accepted Answer

First, we need to calculate the costs of conformance and total costs of quality:
Costs of conformance = Prevention costs + Appraisal costs
= $5,000 + $20,000 + $10,000 + $15,000
= $50,000
Total costs of quality = Costs of conformance + Costs of nonconformance
= $50,000 + $50,000
= $100,000
Ratio of costs of conformance to total costs of quality = (Costs of conformance / Total costs of quality) x 100%
= ($50,000 / $100,000) x 100%
= 50%
Therefore, the best choice is B.

Internal Reports on Quality at the Acme Publishing Company Generated