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Tariff (duty), 738, a tax on imports levied by the federal government. Transaction risk, 740, the possibility that future cash transactions will be affected by changing exchange rates. Translation (or accounting) risk, 740, the degree to which a firm's financial statements are exposed to exchange rate fluctuation. Value stream, 728, all processes that a product must pass through, from the initial customer order to the delivery to the customer. Zero defects, 719, means that all products conform to specifications. n18 1. Quality Cost Classification, Quality Improvement, and Profitability At the beginning of 20X2. Landing Company initiated a quality improvement program. Because of the quality improvement efforts, the number of defective units decreased compared to the previous year. By the end of 20X2, scrap and rework had both decreased. The president of the company was pleased to hear of the success but wanted some assessment of the financial im- pact of the improvements. To make this assessment, the following financial data were collected for the current year (20X2) and the preceding year, 20X1: Sales Scrap Rework Product inspection Vendor certification Product warranty Process acceptance 20X1 $15,000,000 600,000 900,000 150,000 20X2 $15,000,000 450,000 600,000 200,000 150,000 900,000 100,000 60,000 1,200,000 90,000 Required: 1. Classify the costs as prevention, appraisal , internal failure, or extemal failure. 2. Compute quality cost as a percentage of sales for each of the two years. By how much has profit increased because of quality improvements. Assuming that quality costs can be reduced to 3% of sales, how much additional profit is available through quality improvements (assuming that sales revenues will remain the same)