A noted accountant once remarked that the optimal number of faulty TV sets for the XYZ Electric Co. Ltd. to sell is "not zero," even if XYZ promises to repair all faulty XYZ sets that break down, for whatever reason, within two years of purchase. The optimal number would be "not zero" becauseNone of the other alternatives are correctThe repair costs are tax deductibleIt is cheaper (and, therefore more profitable) to repair a few sets than to have such stringent quality control that no defects resultAll the three statements about faulty TV sets are correctZero defects could not be accounted for and hence the accounting system could not capture the information to better plan future production

While having zero defects might seem ideal, achieving absolute perfection in manufacturing is often…

Answered: A noted accountant once remarked that…

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter9: Working Capital

Section: Chapter Questions

Problem 10Q

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A noted accountant once remarked that the optimal number of faulty TV sets for the XYZ Electric Co. Ltd. to sell is "not zero," even if XYZ promises to repair all faulty XYZ sets that break down, for whatever reason, within two years of purchase. The optimal number would be "not zero" because

None of the other alternatives are correct
The repair costs are tax deductible
It is cheaper (and, therefore more profitable) to repair a few sets than to have such stringent quality control that no defects result
All the three statements about faulty TV sets are correct
Zero defects could not be accounted for and hence the accounting system could not capture the information to better plan future production

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