Cost of qualityElijah Electronics makes wireless headphone sets. The firm produced 76,500 wireless headphone sets during its first year of operation. At year-end, it had no inventory of finished goods. Elijah sold71,910 units through regular market channels, but 765 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 theyear, the firm spent $408,000 on prevention costs and $204,000 on quality appraisal. There were no customer returns. An income statement for the year follows.SalesRegular channelSecondsScrapCost of goods soldOriginal production costsRework costsQuality prevention and appraisalGross marginSelling and administrative expenses (all fixed)Profit before income taxes$14,382,000363,37526,775 $14,772,150$4,889,880107,100612,000 $5,608,980$9,163,1702,499,000$6,664,170a. 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. $

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Answered: Cost of quality Elijah Electronics…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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