1. At the beginning of the year, Randy Company 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	$5,000,000	$5,000,000
Quality training	6,000	9,000
Material inspections	15,000	12,000
Scrap	80,000	60,000
Rework	15,000	12,000
Product inspection	25,000	30,000
Product warranty Required:	150,000	120,000

1. Compute each category of quality costs as a percentage of sales for each year.

Prevention costs, Appraisal costs, Internal failure costs, and External failure costs.

2. How much has profit increased as a result of quality improvements?

3. If quality costs can be reduced to 2.5 percent of sales, how much additional profit would result?