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:

Ownership Transfer

The process by which the title of property or assets is moved from one party to another, affecting legal rights and responsibilities.

Bank Service Charges

Fees charged by a bank for the various services it provides to its customers.

Cash Equivalents

Short-term, highly liquid investments that are easily convertible into known amounts of cash and so near their maturity that they present insignificant risk of changes in value.

Balance Sheet

A financial statement that presents a company's financial position at a specific point in time, showing assets, liabilities, and shareholders' equity.