In 2016, Creative Design, Inc

question 11

Essay

In 2016, Creative Design, Inc., instituted a quality improvement program. At the end of 2017, the management of the corporation requested a report to show the amount saved by the measures taken during the year. The actual sales and actual quality costs for 2016 and 2017 are as follows:
Required:
a. Classify each cost as variable or fixed with respect to sales and compute the variable cost ratio for 2016. Be careful-costs may change because of quality improvement, not cost behavior.
b. How much did profits increase because of quality improvements made in 2017, assuming all reductions in quality costs are attributable to quality improvements?
c. Prepare an interim trend quality costs report for Creative Design, Inc.

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Definitions:

Projected Output Rate

An estimated rate of production for future periods based on current data and trends, forecasting the volume of output.

Record Accuracy

The degree to which records are complete, correct, and reliable.

MRP

Material Requirements Planning, a system for inventory and production planning that ensures materials and products are available for production and delivery to customers.

Successful MRP

Refers to the effective implementation and management of Material Requirements Planning, a system for efficiently managing the manufacturing process through inventory control and production scheduling.