Question
rend, Long-Range Performance Report In 20x4, Tru-Delite Frozen Desserts, Inc., instituted a quality improvement program. At the end of 20x5, the management of the corporation
rend, Long-Range Performance Report
In 20x4, Tru-Delite Frozen Desserts, Inc., instituted a quality improvement program. At the end of 20x5, the management of the corporation requested a report to show the amount saved by the measures taken during the year. The actual sales and quality costs for 20x4 and 20x5 are as follows:
20x4 | 20x5 | |
Sales | $600,000 | $600,000 |
Scrap | 15,000 | 15,000 |
Rework | 20,000 | 10,000 |
Training program | 5,000 | 6,000 |
Consumer complaints | 10,000 | 5,000 |
Lost sales, incorrect labeling | 8,000 | 0 |
Test labor | 12,000 | 8,000 |
Inspection labor | 25,000 | 24,000 |
Supplier evaluation | 15,000 | 13,000 |
Tru-Delite's management believes that quality costs can be reduced to 2.5 percent of sales within the next five years. At the end of 20x9, Tru-Delite's sales are projected to grow to $750,000. The projected relative distribution of quality costs at the end of 20x9 is as follows:
Scrap | 15 | % |
Training program | 20 | |
Supplier evaluation | 25 | |
Test labor | 25 | |
Inspection labor | 15 | |
Total quality costs | 100 | % |
Required:
1. Profits increased by what amount due to quality improvements made in 20x5? $____
2. Prepare a long-range performance report that compares the quality costs incurred at the end of 20x5 with the quality cost structure expected at the end of 20x9. If an amount is zero, enter "0". Round percentages to one decimal place, when rounding is required. For example, 5.8% would be entered as "5.8". Select "NA" if there is no budget variance. Round your answers to the nearest dollar, with two exceptions: round test labor and scrap long-range target costs down to the nearest dollar (for example, $905.90 rounds down to $905).
Actual Costs, 20x5 | Long-Range Target Costs | Budget Variance | Favourable (F), Unfavorable (U) or NA | |
Prevention costs: | ||||
Training program | $___ | $___ | $____ | Unfavorable |
Supplier evaluation | ___ | ___ | ____ | Unfavorable |
Total prevention costs | $____ | $___ | $___ | Unfavorable |
Appraisal costs: | ||||
Test labor | $___ | $___ | $___ | Unfavorable |
Inspection labor | ___ | ___ | ___ | Unfavorable |
Total appraisal costs | $____ | $____ | $___ | Unfavorable |
Internal failure costs: | ||||
Scrap | $___ | $___ | $___ | Unfavorable |
Rework | ___ | ___ | ___ | Unfavorable |
Total internal failure costs | $__ | $___ | $____ | Unfavorable |
External failure costs: | ||||
Consumer complaints | $___ | ____ | $___ | Unfavorable |
Lost sales, incorrect labeling | ___ | ___ | ___ | NA |
Total external failure costs | $___ | ___ | $___ | Unfavorable |
Total quality costs | $___ | $___ | $___ | Unfavorable |
Percentage of sales | ___% | ___% | ___% | Unfavorable |
3. What would be the profit increase in 20x9 if the 2.5 percent performance standard is met in that year? The profit
increase by $ ____
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