Ethics and quality. Weston Corporation manufactures auto parts for two leading Japanese automakers. Nancy Evans is the management accountant for one of Weston's largest manufacturing plants. The plant's general manager, Chris Sheldon, has just returned from a meeting at corporate headquarters where quality expectations were outlined for 2013. Chris calls Nancy into his office to relay the corporate quality objective that total quality costs will not exceed $10 \%$ of total revenues by plant under any circumstances. Chris asks Nancy to provide him with a list of options for meeting corporate headquarters's quality objective. The plant's initial budgeted revenues and quality costs for 2013 are as follows:$$
\begin{array}{lr}
\text { Revenue } & 5,100,000 \\
\text { Quality costs } & \\
\text { Testing of purchased materials } & 48,000 \\
\text { Quality control training for production staff } & 7,500 \\
\text { Warranty repairs } & 123,000 \\
\text { Quality design engineering } & 72,000 \\
\text { Customer support } & 55,500 \\
\text { Materials scrap } & 18,000 \\
\text { Product inspection } & 153,000 \\
\text { Engineering redesign of failed parts } & 31,500 \\
\text { Rework of failed parts } & 27,000
\end{array}
$$Prior to receiving the new corporate quality objective, Nancy had collected information for all of the plant's possible options for improving both product quality and costs of quality. She was planning to introduce the idea of reengineering the manufacturing process at a one-time cost of $$\$ 112,500$$, which would decrease product inspection costs by approximately $25 \%$ per year and was expected to reduce warranty repairs and customer support by an estimated $40 \%$ per year. After seeing the new corporate objective, Nancy is reconsidering the reengineering idea.
Nancy returns to her office and crunches the numbers again to look for other aiternatives. She concludes that by increasing the cost of quality control training for production staff by $$\$ 22,500$$ per year, the company would reduce inspection costs by $10 \%$ annually and reduce warranty repairs and customer support costs by $20 \%$ per year, as well. She is leaning toward only presenting this latter option to Chris because this is the only option that meets the new corporate quality objective.