In 2011, Milton Thayne, president of Carbondale Electronics, received a report indicating that quality costs were 31 percent of sales. Faced with increasing pressures from imported goods, Milton resolved to take measures to improve the overall quality of the company€™s products. After hiring a consultant in 2010, the company began an aggressive program of total quality control. At the end of 2015, Milton requested an analysis of the progress the company had made in reducing and controlling quality costs. The Accounting Department assembled the following data:

Required:
1. Compute the quality costs as a percentage of sales by category and in total for each year.
2. Prepare a multiple-year trend graph for quality costs, both by total costs and by category. Using the graph, assess the progress made in reducing and controlling quality costs. Does the graph provide evidence that quality has improved? Explain.
3. Using the 2011 quality cost relationships (assume all costs are variable), calculate the quality costs that would have prevailed in 2014. By how much did profits increase in 2014 because of the quality improvement program? Repeat for 2015.

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Sales Prevention Appraisal S10,000 15,000 30,000 15,000 5,000 Internal Failure External Failure 2011 2012 2013 2014 2015 S500,000 600,000 700,000 600,000 500,000 S 5,000 25,000 35,000 40,000 50,000 $80,000 60,000 35,000 25,000 12,000 $60,000 50,000 25,000 20,000 8,000