In 20X1, Don Blackburn, president of Price Electronics, received a report indicating that quality costs were 31% of sales. Faced with increasing pressures from imported goods, Don resolved to take measures to improve the overall quality of the company's products. After hiring a consultant in 20X1, the company began an aggressive program of total quality control. At the end of 20X5, Don 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 20X1 quality cost relationships (assume all costs are variable), calculate the quality costs that would have prevailed in 20X4. By how much did profits increase in 20X4 because of the quality improvement program? Repeat for 20X5.

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20X1 20X2 20X3 20X4 20X5 Sales $1,000,000 1,200,000 1,400,000 1,200,000 1,000,000 PreventionAppraisal $20,000 30,000 60,000 30,000 10,000 $10,000 50,000 70,000 80,000 100,000 Internal Failure $160,000 120,000 70,000 50,000 24,000 External Failure $120,000 100,000 50,000 40,000 16,000