SarahLou Company Had Sales of $2,500,000 for Last Year A Classify Each of the Quality-Related Costs as Control (Prevention

Essay

SarahLou Company had sales of $2,500,000 for last year. Data on quality-related costs for last year are as follows: $$\begin{array} { l r } \text { Inspection } & \$ 80,000 \\\text { Scrap } & 10,000 \\\text { Rework } & 45,000 \\\text { Quality training } & 20,000 \\\text { Warranty work } & 100,000 \\\text { Customer complaints } & 30,000\end{array}$$ A. Classify each of the quality-related costs as control (prevention and appraisal), internal failure, or external failure.
B. What percentage of sales is accounted for by quality-related costs?
C. If quality-related costs could be reduced to 2% of sales, by how much would SarahLou's profit increase?