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o customer returns. An income statement for the year follows. (See attached) a. Compute the total pre-tax profit lost by the company in its first year of operations by selling defective units as seconds or as scrap rather than selling the units through regular channels. $______ b. Compute the total failure cost for the company in its first year. $______ c. Compute total quality cost incurred by the company in

o customer returns. An income statement for the year follows. (See attached) a. Compute the total pre-tax profit lost by the company in its first year of operations by selling defective units as seconds or as scrap rather than selling the units through regular channels. $______ b. Compute the total failure cost for the company in its first year. $______ c. Compute total quality cost incurred by the company in

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter13: Emerging Topics In Managerial Accounting
Section: Chapter Questions
Problem 28BEB: Quality Cost Report Loring Company had total sales of 2,400,000 for fiscal 20X1. The costs of...
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Elijah Electronics makes wireless headphone sets. The firm produced 58,500 wireless headphone sets during its first year of operation. At year-end, it had no inventory of finished goods. Elijah sold 54,990 units through regular market channels, but 585 of the units produced were so defective that they had to be sold as scrap. The remaining units were reworked and sold as seconds. For the year, the firm spent $312,000 on prevention costs and $156,000 on quality appraisal. There were no customer returns. An income statement for the year follows. (See attached)

a. Compute the total pre-tax profit lost by the company in its first year of operations by selling defective units as seconds or as scrap rather than selling the units through regular channels. $______

b. Compute the total failure cost for the company in its first year. $______

c. Compute total quality cost incurred by the company in its first year. $______

Sales Regular channel $10,998,000 Seconds 277,875 Scrap 20,475 $11,296,350 Cost of goods sold Original production costs $3,739,320 Rework costs 81,900 Quality prevention and appraisal 468,000 $4,289,220 Gross margin $7,007,130 Selling and administrative expenses (all fixed) 1,911,000 Profit before income taxes $5,096,130
Transcribed Image Text:Sales Regular channel $10,998,000 Seconds 277,875 Scrap 20,475 $11,296,350 Cost of goods sold Original production costs $3,739,320 Rework costs 81,900 Quality prevention and appraisal 468,000 $4,289,220 Gross margin $7,007,130 Selling and administrative expenses (all fixed) 1,911,000 Profit before income taxes $5,096,130
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