Figure 14-3
At the beginning of the year, Kowalski 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. For the current year, internal failure costs are what percentage of sales?
A) 4.00%
B) 2.90%
C) 2.50%
D) 1.50%

Question

Figure 14-3
At the beginning of the year, Kowalski 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. For the current year, internal failure costs are what percentage of sales?
A) 4.00% 
B) 2.90% 
C) 2.50% 
D) 1.50%

Quizplus · Accepted Answer

Internal failure costs are $1,000,000 and sales are $25,000,000. Therefore, internal failure costs are 1,000,000 / 25,000,000 = 0.04 or 4.00% of sales.

Figure 14-3 at the Beginning of the Year, Kowalski Company Initiated a Initiated