Currently, management is reviewing the incidence of scrap and waste in the manufacturing process at
one of its plants. Meeks defines scrap and waste as any defective unit that is rejected for lack of functionality
or another aspect of quality. The plants have a number of different inspection points, and failure or rejection
can occur at any inspection point. The number of defective units is listed in the following table; management
estimates the cost of this waste in labor and materials is approximately $10 per unit.
An unfavorable trend appears to exist with regard to defects, and management has asked you to investigate
and estimate the defective units in the coming months. A first step in your investigation is to identify
the cost drivers of defective parts, to understand what causes them, and to provide a basis on which to estimate
future defects. For this purpose, you have obtained these recent data on the units produced, the units
shipped, and the cost of sales since these numbers are easily available and relatively reliable on a monthly
basis: