At the Beginning of the Year, Kowalski Company Initiated a Quality

Multiple Choice

At the beginning of the year, Kowalski Company initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years: $\begin{array}{lrr}&\text { Freceding Year }&\text { Current Year }\\\text { Sales } & \$ 3,000,000 & \$ 3,000,000 \\\text { Quality training } & 3,000 & 4,500 \\\text { Material inspections } & 7,500 & 12,000 \\\text { Scrap } & 60,000 & 45,000 \\\text { Rework } & 120,000 & 75,000 \\\text { Product inspection } & 15,000 & 30,000 \\\text { Product warranty } & 105,000 & 82,500\end{array}$ If quality costs had been reduced to 2.5 percent of sales in the current year, profits would have increased by

A) $255,000.
B) $174,000.
C) $91,500.
D) $37,500.