Trend, Long-Range Performance Report
In 2014, Tru-Delite Frozen Desserts, Inc., instituted a quality improvement program. At the end of 2015, the management of the corporation requested a report to show the amount saved by the measures taken during the year. The actual sales and quality costs for 2014 and 2015 are as follows:
|
2014 |
2015 |
|
| Sales |
$ 600,000 |
$ 600,000 |
| Scrap |
15,000 |
15,000 |
| Rework |
20,000 |
10,000 |
| Training program |
5,000 |
6,000 |
| Consumer complaints |
10,000 |
5,000 |
| Lost sales, incorrect labeling |
8,000 |
0 |
| Test labor |
12,000 |
8,000 |
| Inspection labor |
25,000 |
24,000 |
| Supplier evaluation |
15,000 |
13,000 |
Tru-Delite's management believes that quality costs can be reduced to 2.5 percent of sales within the next five years. At the end of 2019, Tru-Delite's sales are projected to grow to $750,000. The projected relative distribution of quality costs at the end of 2019 is as follows:
| Scrap |
15 |
% |
| Training program |
20 |
|
| Supplier evaluation |
25 |
|
| Test labor |
25 |
|
| Inspection labor |
15 |
|
| Total quality costs |
100 |
%
|
1. Prepare a long-range performance report that compares the quality costs incurred at the end of 2015 with the quality cost structure expected at the end of 2019. If an amount is zero, enter "0". Round percentages to one decimal place, when rounding is required. For example, 5.8% would be entered as "5.8". If the budget variance amount is unfavorable enter "U" in the last column of the table. Enter "F" if it is favorable, and enter "NA" if there is no budget variance. Round your answers to the nearest dollar, with two exceptions: round test labor and scrap long-range target costs down to the nearest dollar (for example, $905.90 rounds down to $905).
|
actual costs 2015 |
long range target cost |
budget variance |
| prevention costs: |
|
|
|
| training program |
6000 |
3750 |
2250 |
| supplier evaluation |
13000 |
4688 |
8312 |
| total prevention costs |
19000 |
8438 |
10562 |
| appraisal costs: |
|
|
|
| test labor |
|
4687 |
|
| inspection labor |
|
2813 |
|
| total appraisal costs |
|
7500 |
|
| internal failure costs: |
|
|
|
| scrap |
|
2812 |
|
| rework |
|
0 |
|
| total internal failure costs |
|
2812 |
|
| external failure costs: |
|
|
|
| consumer complaint |
|
0 |
|
| lost sales |
0 |
0 |
0 |
| total external failure |
|
0 |
|
| total quality costs |
|
18750 |
|
| percent sales |
|
2.5% |
|
2. What would be the profit increase in 2019 if the 2.5 percent performance standard is met in that year?
The profit increase by $