At the beginning of the year, Andrew 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:
$\begin{array}{lrr}
&\underline{\text {Preceding Year}}& \underline{\text {Current Year}}\
\text { Sales } & \$ 2,400,000 & \$ 2,400,000 \
\text { Quality training } & 30,000 & 48,000 \
\text { Material inspections } & 7,000 & 8,000 \
\text { Scrap } & 48,000 & 30,00 \
\text { Rework } & 60,000 & 48,000 \
\text { Product inspection } & 10,000 & 12,000 \
\text { Product warranty } & 36,000 & 24,000
\end{array}$
-Refer to the figure.For the current year,what percentage of sales are internal failure costs?
A)1.25%
B)2.00%
C)3.25%
D)4.25%

Question

At the beginning of the year, Andrew 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:
$\begin{array}{lrr}
 &\underline{\text {Preceding Year}}& \underline{\text {Current Year}}\
\text { Sales } & \$ 2,400,000 & \$ 2,400,000 \
\text { Quality training } & 30,000 & 48,000 \
\text { Material inspections } & 7,000 & 8,000 \
\text { Scrap } & 48,000 & 30,00 \
\text { Rework } & 60,000 & 48,000 \
\text { Product inspection } & 10,000 & 12,000 \
\text { Product warranty } & 36,000 & 24,000
\end{array}$
-Refer to the figure.For the current year,what percentage of sales are internal failure costs?
A)1.25%
B)2.00%
C)3.25%
D)4.25%

Quizplus · Accepted Answer

Internal failure costs are costs associated with defects found before the delivery of a product to the customer. In this case, internal failure costs include scrap and rework costs. For the current year, scrap costs are $30,000 and rework costs are $48,000, totaling $78,000. To find the percentage of sales, divide the total internal failure costs by the sales and multiply by 100: $(78,000 / 2,400,000) * 100 = 3.25%$.

At the Beginning of the Year, Andrew Company Initiated a Quality