Question

A quality control activity analysis indicated the following four activity costs of an administrative department:

Redesigning a form to reduce errors: $15,000
Responding to customer complaints: 75,000
Verifying the accuracy of a form: 30,000
Correcting errors in forms: 60,000
Total: $180,000
If sales are $3,000,000, what percentage of total sales are the internal failure costs?

a.1.0%
b.3.0%
c.33.3%
d.2.0%

Answer 1

total sales are the internal failure costs is 2%

Step-by-step explanation:

given data

form to reduce errors = $15,000

customer complaints = 75,000

Verifying = 30,000

Correcting errors = 60,000

Total = $180,000

sales = $3,000,000

to find out

total sales are the internal failure costs

solution

we know here that internal failture cost is express as

internal failture cost = correcting error in form ...........1

internal failture cost = $60000

and

internal failture cost as % of total cost is here as

internal failture cost to sale =
`(internal\ failture\ cost)/(sales)` .......2

internal failture cost to sale =
`(60000)/(3000000)`

internal failture cost to sale = 2%

so total sales are the internal failure costs is 2%