The general manager of the manufacturing division of Acme, Ltd is preparing for an upcoming P&L meeting with her boss and representatives from corporate accounting. She begins by reviewing the date she has collected.
Category Last year This Year
Sales 25,000,000 30,000,000
CPGS 21,250,000 25,500,000
S,G & A 2,000,000 2,400,000
Net Profit 1,750,000 2,100,000
Prices for the company’s products and cost have remained relatively constant for the past year.
As she digs a little deeper, she became concerned about rising quality costs. Total COQ last year was 3,187,500. This year is has gone up to 3,825,000-a 637,500 increase. She is certain that the accountants will see this as an unreasonable increase in quality cost. She is concerned about the best way to present the COQ figures at the meeting to show the true picture. How do you interpret this increase and what advice would you offer her about the best way to present the information?
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