Cost of quality Elijah Electronics makes wireless headphone sets. The firm produced 76,500 wireless headphone sets during its first year of operation. At year-end, it had no inventory of finished goods. Elijah sold 71,910 units through regular market channels, but 765 of the units produced were so defective that they had to be sold as scrap. The remaining units were reworked and sold as seconds. For the year, the firm spent $408,000 on prevention costs and $204,000 on quality appraisal. There were no customer returns. An income statement for the year follows. \begin{tabular}{|l|r|r|} \hline Sales & & \\ \hline Regular channel & $14,382,000 & \\ \hline Seconds & 363,375 & \\ \hline Scrap & 26,775 & $14,772,150 \\ \hline Cost of goods sold & & \\ \hline Original production costs & $4,889,880 & \\ \hline Rework costs & 107,100 & \\ \hline Quality prevention and appraisal & 612,000 & $5,608,980 \\ \hline Gross margin & & $9,163,170 \\ \hline Selling and administrative expenses (all fixed) & 2,499,000 \\ \hline Profit before income taxes & & $6,664,170 \\ \hline \end{tabular} a. Compute the total pre-tax profit lost by the company in its first year of operations by selling defective units as seconds or as scrap rather than selling the units through regular channels. \$ 322,830 b. Compute the total failure cost for the company in its first year. $107,100 c. Compute total quality cost incurred by the company in its first year. $719,100