19-32 Quality improvement, relevant costs, and relevant revenues. The Brightlight Corporation uses multicolored molding to make plastic lamps. The molding operation has a capacity of 150,000 units per year. The demand for lamps is very strong. Brightlight will be able to sell whatever output quantities it can pro- duce at $45 per lamp. Brightlight can start only 150,000 units into production in the molding department because of capacity constraints on the molding machines. If a defective unit is produced at the molding operation, it must be scrapped at a net disposal value of zero. Of the 150,000 units started at the molding operation, 15,000 defec- tive units (10%) are produced. The cost of a defective unit, based on total (fixed and variable) manufacturing costs incurred up to the molding operation, equals $25 per unit, as follows: Direct materials (variable) Direct manufacturing labor, setup labor, and materials-handling labor (variable) Equipment, rent, and other allocated overhead, including inspection and testing costs on scrapped parts (fixed) Total $13 per unit 3 per unit 9 per unit $25 per unit 4 Brightlight's designers have determined that adding a different type of material to the existing direct materi- als would result in no defective units being produced, but it would increase the variable costs by $4 per lamp in the molding department.

2. What nonfinancial and qualitative factors should Brightlight consider in making the decision?

19-32 Quality improvement, relevant costs, and relevant revenues. The Brightlight Corporation uses multicolored molding to make plastic lamps. The molding operation has a capacity of 150,000 units per year. The demand for lamps is very strong. Brightlight will be able to sell whatever output quantities it can produce at $45 per lamp. Brightlight can start only 150,000 units into production in the molding department because of capacity constraints on the molding machines. If a defective unit is produced at the molding operation, it must be scrapped at a net disposal value of zero. Of the 150,000 units started at the molding operation, 15,000 defective units (10%) are produced. The cost of a defective unit, based on total (fixed and variable) manufacturing costs incurred up to the molding operation, equals $25 per unit, as follows: Brightlight's designers have determined that adding a different type of material to the existing direct materials would result in no defective units being produced, but it would increase the variable costs by $4 per lamp in the molding department. 1. Should Brightlight use the new material? Show your calculations. 2. What nonfinancial and qualitative factors should Brightlight consider in making the decision