At the beginning of the year, Nevermore, Inc., initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years:

	Preceding Year	Current Year
Sales	$2,000,000	$2,000,000
Quality circles (Prevention)	9,000	10,000
Packaging inspections (Appraisal)	20,000	32,000
Scrap (Internal failure)	100,000	90,000
Lost sales (External failure)	180,000	160,000
Downtime (Internal failure)	125,000	120,000
Product inspection (Appraisal)	40,000	90,000

Required:

a.	Compute each category of quality costs as a percentage of sales for each year.
	Prevention costs
	Appraisal costs
	Internal failure costs
	External failure costs
b.	How much has profit increased or decreased as a result of quality improvements?
c.	If quality costs can be reduced to 2.0 percent of sales, how much additional profit (in relation to the "Current Year") would result?