Please explain these questions!
2. During 2015 and 2016, Riches Company reported sales of $36,000,000 per year. Willy listed the following quality costs for the past two years. Assume that all changes in the quality costs are due to a quality improvement program. 2015 (S) 2016 ($) Field trips 900,000 1,800,000 Recalls 1,200,000 600,000 Re inspection 600,000 300,000 Packaging inspection 360,000 240,000 Quality training 240,000 600,000 Process acceptance 300,000 Re testing 870,000 210,000 Lost sales (estimated) 1,800,000 1,200,000 Product inspection 300,000 180,000 Complaint adjustment 930,000 570,000 Total 7,200,000 6,000,00 Required: a. Prepare a quality cost report for each year (2015 and 2016) b. How much were the additional resources invested in prevention and appraisal activities (control cost) from one year to the next? What return did this investment generate? ( What reduction in failure costs was achieved ?) c. The management of Riches believes that it is possible to reduce quality costs to 2.5 percent of sales. Assuming sales continue at $36,000,000 level, calculate the additional profit potential facing Riches. Is the expectation of improving quality and reducing quality costs to 2.5 percent of sales realistic? Explain.1. During 2015 and 2016, Willy Company reported sales of $12,000,000 per year. Willy listed the following quality costs for the past two years. Assume that all changes in the quality costs are due to a quality improvement program. 2015 ($) 2016 ($) Design review 300,000 600,000 Recalls 400,000 200,000 Re inspection 200,000 100,000 Materials inspection 120,000 80,000 Quality training 80,000 200,000 Process acceptance 100,000 Scrap 290,000 70,000 Lost sales ( estimated ) 600,000 400,000 Product inspection 100,000 60,000 Returned goods 310,000 190,000 Total 2,400,000 2,000,000 Required: Prepare a quality cost report for each year. What does this report tell management?3. At the beginning of 2016, Kyle Company initiated a quality improvement program. Considerable effort was expended to reduce the number of defective units produced. By the end of the year, reports from the production manager revealed that scrap and rework had both decreased. The president of the company was pleased to hear of the success but wanted some assessment of the financial impact of the improvements. To make this assessment, the following financial data were collected for the preceding and current years : 2015($) 2016 ($) Sales 20,000,000 20,000,000 Scrap 800,000 600,000 Rework 1,200,000 800,000 Product inspection 200,000 250,000 Product warranty 1,600,000 1,200,000 Quality training 80,000 160,000 Materials inspection 120,000 80,000 Required: a. Classify the cost as prevention, appraisal, internal failure, or external failure b. 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 the quality cost can be reduced to 2.5 percent of sales, how much additional profit is available through quality improvements (assume that sales revenue will remain the same?) c. Prepare a quality cost report for 2016
