Dayton Industries is contemplating some operational changes to reduce its overall costs of quality. The company believes
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Current production and sales level (in units) ...................................... 100,000
Sales price per unit .................................................................................. $150
Current variable cost of making and selling one unit ................................ $ 80
Variable warranty repair costs per unit repaired ....................................... $ 30
Current warranty repair rate of units produced ........................................ 10%
What is the anticipated annual effect on operating income from adopting this quality initiative? To answer this question, first calculate the total costs of quality before making the operational changes and then calculate the total costs of quality after making the operational changes. Compute the difference between the "before" and the "after."
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