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Quality Costs: Profit Improvement and Distribution Across Categories, Gainsharing Muskogee Company had sales of $60,000,000 in 20x1. In 20x5, sales had increased to $75,000,000. A

Quality Costs: Profit Improvement and Distribution Across Categories, Gainsharing

Muskogee Company had sales of $60,000,000 in 20x1. In 20x5, sales had increased to $75,000,000. A quality improvement program was implemented at the beginning of 20x1. Overall conformance quality was targeted for improvement. The quality costs for 20x1 and 20x5 follow. Assume any changes in quality costs are attributable to improvements in quality.

20x1 20x5
Internal failure costs $4,500,000 $225,000
External failure costs 6,000,000 150,000
Appraisal costs 2,700,000 562,500
Prevention costs 1,800,000 937,500
Total quality costs $15,000,000 $1,875,000

Required:

1. Compute the quality cost-to-sales ratio for each year. Round your answers to three decimal places when rounding is required.

20x1
20x5

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