At the Beginning of the Year, Custom Choppers Company Initiated

question 15

Essay

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: $\begin{array}{lrr}&\text { Freceding Year}&\text { Current Year }\\\text { Sales } & \$ 5,000,000 & \$ 5,000,000 \\\text { Quality training } & 22,500 & 25,000 \\\text { Material inspections } & 50,000 & 80,000 \\\text { Scrap } & 250,000 & 225,000 \\\text { Product warranty } & 450,000 & 400,000 \\\text { Rework } & 375,000 & 300,000 \\\text { Product inspection } & 100,000 & 100,000\end{array}$
Required:
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?

Recognize and apply creative practices to enhance decision-making, including morphological analysis and cross-pollination.

Identify the importance of clearly defining problems and avoiding the tendency to preselect solutions.

Differentiate between programmed and nonprogrammed decision situations and their appropriate approaches.

Comprehend how emotions and perceptual defense mechanisms influence decision-making.

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Definitions:

Premise

An initial statement or proposition from which another is inferred or follows as a conclusion.

Exhausting

Causing extreme tiredness and depletion of energy; very demanding and tiring.

Argument

A set of statements or reasons made to persuade others that an action or idea is right or wrong.

Premise

A previous statement or proposition from which another is inferred or follows as a conclusion.