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

question 147

Multiple Choice

At the beginning of the year, Andrew 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:
$\begin{array}{lrr} &\underline{\text {Preceding Year}}& \underline{\text {Current Year}}\\\text { Sales } & \$ 2,400,000 & \$ 2,400,000 \\\text { Quality training } & 30,000 & 48,000 \\\text { Material inspections } & 7,000 & 8,000 \\\text { Scrap } & 48,000 & 30,00 \\\text { Rework } & 60,000 & 48,000 \\\text { Product inspection } & 10,000 & 12,000 \\\text { Product warranty } & 36,000 & 24,000\end{array}$
-Refer to the figure.For the current year,what percentage of sales are external failure costs?

• A)0.8350%
• B)1.0000%
• C)1.1875%
• D)1.5350%

---

Definitions:

Consolidated Balance Sheet

A financial statement that presents the assets, liabilities, and equity of a parent company and its subsidiaries as one single entity.

Fair Market Value

The price at which an asset would be exchanged between a willing buyer and seller in an arm's length transaction.

White Knight

A friendly investor or company that acquires a corporation at fair consideration, often to rescue it from a hostile takeover.

Takeover

A corporate action where one company acquires control over another company, either through a direct purchase of its shares or by agreement.