Compute prevention costs-appraisal costs-internal failure , Cost Accounting

Question:

At the beginning of the year, Asquith Company Ltd 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, Asquith's managers collected the following data for the current and preceding year:

                                              Preceding year

                       Current year

Sales

$10,000,000

$10,000,000

Quality training

45,000

50,000

Materials inspection

100,000

140,000

Scrap

500,000

450,000

Product warranty

900,000

800,000

Rework

750,000

600,000

Product inspection

200,000

220,000





(A) Compute prevention costs, appraisal costs, internal failure costs and external failure costs as a percentage of sales in separate tables 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% of sales, how much additional profit would result? Is there any evidence to suggest this reduction in quality costs may be feasible? Explain.

Posted Date: 2/18/2013 5:00:53 AM | Location : United States







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