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

question 45

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:
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?

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Definitions:

Dollar Denominated Bonds

Bonds issued in the United States that are payable in U.S. dollars, irrespective of the issuer's nationality.

Eurobonds

Bonds issued in a currency other than the home currency of the country or market in which it is issued, often used by companies to raise capital in international markets.

Foreign Bonds

These are bonds issued in a domestic market by a foreign entity, in the domestic market's currency, as a way for the issuer to raise capital from investors in that market.

Foreign Government

The governing authority of a nation, state, locality, or community outside of one's own country.