At the beginning of the year, Custom Choppers 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:

a. Compute each category of quality costs as a percentage of sales for each year.
Prevention costs Appraisal costs Internal failure costs External failure costs
b. How much has profit increased as a result of quality improvements?
c. If quality costs can be reduced to 2.5 percent of sales, how much additional profit would result?

Question

At the beginning of the year, Custom Choppers 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:
  
a. Compute each category of quality costs as a percentage of sales for each year.
Prevention costs Appraisal costs Internal failure costs External failure costs
b. How much has profit increased as a result of quality improvements?
c. If quality costs can be reduced to 2.5 percent of sales, how much additional profit would result?

Quizplus · Accepted Answer

The Answer of At the beginning of the year, Custom Choppers 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:
  
a. Compute each category of quality costs as a percentage of sales for each year.
Prevention costs Appraisal costs Internal failure costs External failure costs
b. How much has profit increased as a result of quality improvements?
c. If quality costs can be reduced to 2.5 percent of sales, how much additional profit would result?

At the Beginning of the Year, Custom Choppers Company Initiated