A Company Has Developed a List of Quality-Related Costs as Follows

question 91

Essay

A company has developed a list of quality-related costs as follows: $\begin{array}{lrr}& \text { Year 1 } & \text { Year 2 } \\\text { Supplier evaluation } & \$ 0 & \$ 70,000 \\\text { Quality training } & 10,000 & 50,000 \\\text { Inspection of finished product } & 75,000 & 60,000 \\\text { Rework } & 50,000 & 40,000 \\\text { Warranty work } & 120,000 & 80,000 \\\text { Sales } & \$ 2,000,000 & \$ 2,000,000\end{array}$ The company's controller is pleased with the Year 2 results and commented that the company is now on its way toward total quality.Is the controller right? Explain.

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Definitions:

Trading Securities

Financial instruments such as shares, bonds, or other securities that are purchased with the intention of selling them in the short term to profit from price fluctuations.

Debt Securities

Financial instruments representing money borrowed that must be repaid, such as bonds, bills, or notes.

Available-for-Sale Securities

Financial assets that a company intends to sell within a short period but can hold onto for an indefinite period, classified as neither held for trading nor held to maturity.

Realizable Securities

Financial assets that can be quickly converted into cash with a known market price.