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

question 114

Essay

A company has developed a list of quality-related costs as follows: $\begin{array}{lrr}&\text { Year } 1&\text { Year } 2\\\text { Supplier evaluation }&\$0&\$0\\\text { Quality training } & 10,000 & 50,000 \\\text { Inspection of finished product } & 75,000 & 60,000 \\\text { Rew ork } & 50,000 & 40,000 \\\text { Warranty work } & 120,000 & 80,000 \\\text { Sales } & \$ 2,000,000 & \$ 2,000,000\end{array}$ 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:

Income

Money received on a regular basis from work, investments, business, etc., used to fund living expenses and savings.

Utility Function

A mathematical representation of how consumers rank different bundles of goods based on the level of satisfaction (utility) they provide.

Consumption

The use of goods and services by households or individuals, often considered in terms of the amount consumed.

Interest Rate

The interest rate is the cost of borrowing money expressed as a percentage of the total amount loaned, typically noted on an annual basis.