The Following Information Pertains to Longhorn Company for the Current

question 28

Multiple Choice

The following information pertains to Longhorn Company for the current year: $$\begin{array} { l r } \text { Sales } & \$ 1,000,000 \\\text { Internal failure costs } & 125,000 \\\text { External failure costs } & 50,000 \\\text { Appraisal costs } & 35,000 \\\text { Prevention costs } & 25,000 \\\text { Cost of goods sold } & 375,000\end{array}$$ Quality costs are what percentage of sales?

• A)2.5%
• B)6.0%
• C)15.0%
• D)23.5%

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Definitions:

Finished Goods Inventory

The inventory of finished goods that are prepared for sale but remain unsold.

Cost of Goods Sold

Cost of Goods Sold (COGS) represents the direct costs attributable to the production of the goods sold by a company, including material and labor expenses.

Manufacturing Overhead Costs

Indirect costs related to manufacturing that cannot be directly attributed to specific units produced, such as maintenance and utility expenses.

Finished Goods Inventory

Finished goods inventory consists of items that have completed the manufacturing process and are ready to be sold to customers, representing a final stage in product inventory.