Question
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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