Below are the newly prepared quality costs for the last two quarters:

	Third quarter 2022	Fourth quarter 2022
Scrap and Rework	$312,000	$624,000
Customer returns/warranty	$524,000	$204,000
TOTAL	$836,000	$828,000

In spite of agreeing to your request to employ further inspection staff from January to increase finished product inspection to 100 per cent, you will see that overall quality costs have shown no significant change. I look forward to receiving your comments on this.

Required:

Explain to the Managing Director on how the situation in the above memorandum arises and what steps may be taken to improve it.