Wainwright Corporation manufactures car parts for two leading Japanese car makers Nancy Evans is the management accountant for one of Wainwright's largest manufacturing plants. The plant's General Manager, Chris Sheldon, has just returned from a meeting at corporate headquarters where quality expectations were outlined for 2015. Chris calls Nancy into his office to relay the corporate quality objective that total quality costs will not exceed 10% of total revenues by plant under any circumstances. Chris asks Nancy to provide him with a list of options for meeting corporate headquarters quality objective. The plant's initial budgeted revenues and quality costs for 2015 are as follows: Revenue Quality costs: Testing of purchased materials Quality control training for production staff Warranty repairs Quality design engineering Customer support Materials scrap Product inspection Engineering redesign of failed parts Rework of failed parts 3,400,000 32,000 5,000 82,000 48,000 37,000 12,000 102,000 21,000 18,000 Prior to receiving the new corporate quality objective, Nancy had collected information for all of the plant's possible options for improving both product quality and costs of quality. She was planning to introduce the idea of re-engineering the manufacturing process at a one-time cost of $75,000, which would decrease product inspection costs by approximately 25% per year and was expected to reduce warranty repairs and customer support by an estimated 40% per year. After seeing the new corporate objective Nancy is reconsidering the re-engineering idea. Nancy returns to her office and crunches the numbers again to look for other alternatives She concludes that, by increasing the cost of quality control training for production staff by $15,000 per year, the company would reduce inspection costs by 10% annually and reduce warranty repairs and customer support costs by 20% per year, as well. She is leaning towards only presenting this latter option to Chris, the general manager, since this is the only option that meets the new corporate quality objective