The Backwoods American Company in Problem 2-1 produces approximately 20,000 parkas annually. The quality management program the company implemented was able to improve the average percentage of good parkas produced by 2% each year, beginning with 83% good-quality parkas in 2003. Only about 20% of poor-quality parkas can be reworked.
a. Compute the product yield for each of the five years.
b. Using a rework cost of $12 per parka, determine the manufacturing cost per good parka for each of the five years. What do these results imply about the company’s quality management program?