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Daley Industries is contemplating some operational changes What is the anticipated annual effect on operating income to reduce its overall costs of quality. from adopting this quality initiative? To answer this question, i (Click the icon to view additional information.) first calculate the total costs of quality before making the operational changes and then calculate the total costs of (Click the icon to view the additional information and quality after making the operational changes. Compute the data.) difference between the "before" and the "after". First, select the labels and then calculate the total costs of quality before making the operational changes. (lf a box is not used in the table leave the box empty; do not select a label or enter a zero.) Costs Daley Cost of Quality Analysis (Before changes) Prevention Costs: Appraisal Costs: This question is complete. Move your cursor over or tap on the red arrows to see incorrect answers. i More Info The company believes that if it upgrades one component of its product at an additional cost of $1.00 per unit, it will be able to decrease its current warranty repair rate by 85%. The company also believes it will be able to sell 1,800 more units over the next year due to an enhanced reputation for quality. Daley currently has enough excess capacity to make the 1,800 extra units needed to meet the increased demand. Print Done Data Table The following data reflects current operations (prior to making the operational changes): Current production and sales level (in units) 111,000 $ 160 Sales price per unit Current variable cost of making and selling one unit 79 $ 33 Variable warranty repair costs per unit repaired Current warranty repair rate of units produced 20% Print Done First, select the labels and then calculate the total costs of quality before making the operational changes. (lf a box is not used in the table leave the box empty; do not select a label or enter a zero.) Costs Daley Cost of Quality Analysis (Before changes) Prevention Costs: Appraisal Costs: Internal Failure Costs: External Failure Costs: Warranty repair cost 732,600 Warranty repair cost 732,600 732,600 Total costs of quality Now calculate the total costs of quality after making the operational changes. Select the labels and then enter the amounts. (Enter a minus sign or parentheses for a benefit or cost saving. If a box is not used in the table leave the box empty, do not select a label or enter a zero.) Costs Daley Cost of Quality Analysis (After changes) (Benefits) Prevention Costs: 111,000 Increase in total variable costs from upgrade Appraisal Costs: Internal Failure Costs: External Failure Costs: Warranty repair cost 111,672 (144,000) Net profit from additional units sold $ Total costs of quality 78,672 Compute the difference between the 'before' and the 'after. and select the appropriate label to reflect whether Daley Industries will experience a net benefit or net cost from making the operational changes. Difference $ Net benefit 653,928
