Kyle Manning, the president of Adamson Plastic Company, is a famous cost cutter in the plastics industry. Two years ago, he accepted an offer from Adamson€™s board of directors to help the company cut costs quickly. In fact, Mr. Manning€™s compensation package included a year-end bonus tied to the percentage of cost decrease over the preceding year. On February 12, 2015, Mr. Manning received comparative financial information for the two preceding years. He was especially interested in the results of his cost-cutting measures on quality control. The quality report shown below was extracted from the company€™s financial information.

Required
a. Explain the strategy that Mr. Manning initiated to control Adamson€™s costs.
b. Indicate whether the strategy was successful or unsuccessful in reducing quality costs.

c. Explain how the strategy will likely affect the company€™s business in the longterm.

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2014 2013 Amount Percentage Amount Percentage Prevention costs Engineering and design Training and education Depreciation on prevention equipment Incentives and awards $65,000 26,000 15,000 20,000 126,000 6.57% 2.63 S69.000 76,000 15,000 20,000 180,000 729% 1.60 2.02 12.73% Total prevention 19.27% Appraisal costs Product and materials inspection Reliability testing Testing equipment (depreciation) Supplies 33,000 27,000 38,000 10,000 108,000 73,000 67.000 38,000 16.000 194.000 7.82 2.73 4.07 1.01 Total appraisal 10.90% 2077% Intemal failure costs Scrap Repair and rework Downtime Reinspection 52,000 46,000 64,000 8,000 170,000 4.65 6.46 0.8 17.17% 120,000 150,000 40.000 24.000 334,000 12.85 16.06 4.28 2.57 35.76% Total internal failure External failure cost Warranty repairs and replacement Freight Customer relations Restocking and packaging 347,000 75,000 45,000 119,000 586,000 13.38 3.32 3.00 4.50 24.20% 35.05 4.55 12.02 59.20% 125,000 31,000 28,000 42.000 226,000 Total external failure Grand total $990,000 100.00% S934.000 100.00%