In 2014, Tru-Delite Frozen Desserts, Inc., instituted a quality improvement program. At the end of 2015, the

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In 2014, Tru-Delite Frozen Desserts, Inc., instituted a quality improvement program. At the end of 2015, the management of the corporation requested a report to show the amount saved by the measures taken during the year. The actual sales and quality costs for 2014 and 2015 are as follows:
In 2014, Tru-Delite Frozen Desserts, Inc., instituted a quality improvement

Tru-Delite€™s management believes that quality costs can be reduced to 2.5 percent of sales within the next five years. At the end of 2019, Tru-Delite€™s sales are projected to grow to $750,000. The projected relative distribution of quality costs at the end of 2019 is as follows:
Scrap ......... 15%
Training program .. 20
Supplier evaluation .. 25
Test labor ..... 25
Inspection labor .. 15
Total quality costs ..100%
Required:
1. Profits increased by what amount due to quality improvements made in 2015?
2. Prepare a long-range performance report that compares the quality costs incurred at the end of 2015 with the quality cost structure expected at the end of 2019.
3. Are the targeted costs in the year 2019 all value-added costs? How would you interpret the variances if the targeted costs are value-added costs?
4. What would be the profit increase in 2019 if the 2.5 percent performance standard is met in that year?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
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Related Book For  book-img-for-question

Cornerstones Of Cost Management

ISBN: 493

3rd Edition

Authors: Don R. Hansen, Maryanne M. Mowen

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