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

question 23

Essay

At the beginning of the year, Randy 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: $\begin{array}{lrr}&\text { Freceding Year } & \text { Current Year } \\\text { Sales } & £ 5,000,000 & £ 5,000,000 \\\text { Quality training } & 6,000 & 9,000 \\\text { Material inspections } & 15,000 & 12,000 \\\text { Scrap } & 80,000 & 60,000 \\\text { Rework } & 15,000 & 12,000 \\\text { Product inspection } & 25,000 & 30,000 \\\text { Product warranty } & 150,000 & 120,000\end{array}$
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:

Evolutionary Perspective

A theoretical approach that explains various aspects of human nature as adaptations made possible by natural selection.

Jealousy

An emotional state that arises from perceived threats to a valued relationship or position, often accompanied by feelings of insecurity and fear of loss.

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Refers to a female organism in the period during which she is willing to accept a male for mating.

Polygyny

A form of marriage in which a man is allowed to have more than one wife at the same time.