Answer:
Given:
Cost of Redesigning a form to reduce errors = $15,000
Cost of Responding to customer complaints = $75,000
Cost of Verifying the accuracy of a form = $30,000
Cost of Correcting errors in forms = $60,000
Sales = $3,000,000
<u><em>Prevention costs is defined as the costs that incur to obviate or decrease the number of flaw at first places. is defined as the costs that incur to obviate or decrease the number of flaw at first places. </em></u>
Here Prevention cost is computed as :
Prevention cost = Cost of Redesigning a form to reduce errors + Cost of Responding to customer complaints + Cost of Correcting errors in forms
Prevention cost = $15,000 + $75,000 + $60,000
Prevention cost = $ 150,000
∴ Prevention cost to total sales ratio =
Prevention cost to total sales ratio =
<u><em>Prevention cost to total sales ratio = 0.05</em></u>
<u><em>% Prevention cost to total sales = 5%</em></u>