At the Beginning of the Year, Ball Company Initiated a Quality

question 35

Essay

At the beginning of the year, Ball 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: $\begin{array}{lrr}&\text { Preceding Year } & \text { Current Year } \\\text { Sales } & £ 5,000,000 & £ 5,000,000 \\\text { Quality training } & 22,500 & 25,000 \\\text { Material inspections } & 50,000 & 80,000 \\\text { Scrap } & 250,000 & 225,000 \\\text { Product warranty } & 450,000 & 400,000 \\\text { Rework } & 375,000 & 300,000 \\\text { Product inspection } & 100,000 & 100,000\end{array}$
a.Compute each category of quality costs as a percentage of sales for each year.Prevention costsAppraisal costsInternal failure costsExternal failure costs
b.How much has profit increased as a result of quality improvements?
c.If quality costs can be reduced to 2.5 per cent of sales, how much additional profit would result?

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Definitions:

Middle Managers

Employees who manage other managers or advanced professionals, acting as an intermediary between top management and front-line employees.

Overall Operations

Encompasses the total processes and activities undertaken by an organization to produce goods or provide services, including production, logistics, and management functions.

Effective Managers

are individuals who achieve desired results through the efficient use of resources and the successful direction of their team members.

High Performance

Achieving significantly better outcomes or efficiencies than standard or expected levels, often through excellence in execution and strategy.