- Additional Information

-COSTS

- Additional Costs

The QC manager and controller have forecast the following additional costs to modify the production process: E: (Click the icon to view the additional costs.) Sparkle Fun produces cell phone covers for all makes and models of cell phones. Sparkle Fun sells 1,010,000 units each year at a price of $5 per unit and a contribution margin of 25%. (Click the icon for additional information.) The current costs of quality are as follows: (Click the icon to view the costs.) Requirement If the improvements result in a 60% decrease in product replacement cost and a 40% decrease in customer returns, what is the impact on the overall COQ and the company's operating income? What should Sparkle Fun do? Explain. What is the impact on the overall COQ and the company's operating income? (Use parentheses or a minus sign for a net cost.) Amount Benefits of quality improvements Cost of making quality improvements 238,200 Net benefit (cost) of making quality improvements Enter any number in the edit fields and then click Check Answer. 1 part remaining Clear All Final Check 40% decrease in customer returns what is the . More Info A survey of Sparkle Fun customers over the past 12 months indicates that customers were very satisfied with the products but a number of customers were disappointed because the products they purchased did not fit their phones. They then had to hassle with returns and replacements. Sparkle Fun's managers want to modify their production processes to develop products that more closely match Sparkle Fun's specifications because the quality control in place to prevent poor-quality products from reaching customers is not working very well. Print Done Data Table $ 180,000 $ 150,000 $ Prevention costs Appraisal costs Internal failure costs Rework Scrap External failure costs Product replacements Lost sales from customer returns 440,000 20,000 $ $ 320,000 $ 830,000 Print Done -X Data Table $ 100,000 CAD design improvement Improve machine calibration to meet specifications GA 138,200 Print Done