Figure 14-3 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:

-Refer to Figure 14-3.As a result of quality improvements, profits have increased by

Question

Figure 14-3 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:
 
-Refer to Figure 14-3.As a result of quality improvements, profits have increased by

Quizplus · Accepted Answer

To calculate the change in profit due to quality improvements, we need to compare the profits in the current year with the profits in the preceding year.

Profits in current year = $550,000 - $110,000 - $45,000 = $395,000 
Profits in preceding year = $440,000 - $150,000 - $50,000 = $240,000

Increase in profits due to quality improvements = $395,000 - $240,000 = $155,000

However, the question only asks for the increase in profits due to quality improvements, not the total profits. Therefore, we need to subtract the increase in profits that can be attributed to the reduction in scrap and rework costs:

Reduction in scrap and rework costs = $45,000 - $30,000 = $15,000

Increase in profits due to quality improvements = $155,000 - $15,000 = $140,000

Therefore, the profits have increased by $140,000, which corresponds to answer choice B.

Figure 14-3 at the Beginning of the Year, Grant Company