Reference no: EM13513730

At the beginning of the year, Donjuan 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:

	Preceding Year-	Current Year
Sales	$4,000,000	$4,000,000
Quality training	10,000	15,000
Materials inspection	25,000	35,000
Scrap	200,000	180,000
Rework	250,000	200,000
Product inspection	40,000	60,000
Product warranty	40,000	60,000
Product warranty	300,000	250,000

1. Classify each of the costs as prevention costs, appraisal costs, internal failure costs, or external failure costs: (a)quality training; (b)materials inspection; (c)scrap; (d)rework; (e) product inspection; (f) product warranty.

2. Compute each category of quality costs as a percentage of sales:

	Preceding Year	Current Year
Prevention costs Appraisal costs Internal failure costs External failure costs

3. (a) How much has profit increased as a result of quality improvement?

(b) If quality costs can be reduced to 2.5 percent of sales, how much additional profit will result?