Bhimani, Horngren,
Datar and Rajan,
Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
Carmody should implement the new design since the relevant benefits exceed the relevant costs by €15,000.
3 Carmody should also consider other benefits of improving quality. For example, the process of quality improvement will help Carmody’s managers and workers gain expertise about the product and the manufacturing process that may lead to further cost reductions in the future. Improving quality within the plant is also likely to translate into delivering better-quality products to customers. The increased reputation and customer goodwill may well lead to higher future revenues through greater unit sales and higher sales prices.
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