A. Jennifer incurs the following quality costs:$17,000 on systems development$8,000 on the depreciation of test equipment$102,000 on warranty repairs$27,000 on the net cost of scrap$16,000 on the net cost of spoilage$77,000 on audits of the effectiveness of thequality system.What are the total internal failure costs?B. Tyler's Inc. makes soap. Tyler plans toproduce 5000 soaps next month. 5000 soapsrequire 3000 tons of detergent at the cost of$11 a ton. Tyler also estimates the need for 1Oworkers to work 8 hours a day to meet thenext month's production target. The currentlabor rate is $16.50/hr. Tyler estimates fixedmanufacturing overhead cost to be $42,000for the year and variable manufacturingoverhead to be $15 per labor hour. Thecompany plans to sell the soaps for $27 each.What is the total prime cost incurred by Tylerfor the next month? (Assume the month has30 days)

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A. Jennifer incurs the following quality costs: $17,000 on systems development $8,000 on the depreciation of test equipment $102,000 on warranty repairs $27,000 on the net cost of scrap $16,000 on the net cost of spoilage $77,000 on audits of the effectiveness of the quality system. What are the total internal failure costs?

A. Jennifer incurs the following quality costs: $17,000 on systems development $8,000 on the depreciation of test equipment $102,000 on warranty repairs $27,000 on the net cost of scrap $16,000 on the net cost of spoilage $77,000 on audits of the effectiveness of the quality system. What are the total internal failure costs?

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter2: Accounting For Materials

Section: Chapter Questions

Problem 16P: Lloyd Industries manufactures electrical equipment from specifications received from customers. Job...

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Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below. At the zero-defect state, Nabors expects to spend 375,000 on quality engineering, 75,000 on vendor certification, and 50,000 on packaging inspection. Assume sales to be 25,000,000. Required: 1. Prepare a long-range performance report for 20x5. What does this report tell the management of Nabors? 2. Explain why quality costs still are present for the zero-defect state. 3. What if Nabors achieves the zero-defect state reflected in the report? What are some of the implications of this achievement?
Verde Company reported operating costs of 50,000,000 as of December 31, 20x5, with the following environmental costs: Required: 1. Prepare an environmental cost report, classifying costs by quality category and expressing each as a percentage of total operating costs. What is the message of this report? 2. Prepare a pie chart that shows the relative distribution of environmental costs by category. What does this report tell you? 3. What if Verde deliberately did not include the cost of damaging the ecosystem because of solid waste disposal in its environmental cost report? Offer possible reasons for this decision. If consciously avoided, is this decision unethical?
Lloyd Industries manufactures electrical equipment from specifications received from customers. Job X10 was for 1,000 motors to be used in a specially designed electrical complex. The followingcosts were determined for each motor: At final inspection, Lloyd discovered that 33 motors did not meet the exacting specifications established by the customer. Anexamination indicated that 18 motors were beyond repair andshould be sold as spoiled goods for 75 each. The remaining15 motors, though defective, could be reconditioned as first-qualityunits by the addition of 1,650 for materials, 1,500 for labor, and1,200 for factory overhead. Required: Prepare the journal entries to record the following: 1. The scrapping of the 18 motors, with the income from spoiledgoods treated as a reduction in the manufacturing cost of thespecific job. 2. The correction of the 15 defective motors, with the additionalcost charged to the specific job. 3. The additional cost of replacing the 18 spoiled motors with newmotors. 4. The sale of the spoiled motors for 75 each. 5. If the reconditioned motors sell for 400 each, is Lloyd betteroff reconditioning the defective motors or selling them as isfor 75 as spoiled goods?
One of the tennis rackets that Ace Sporting Goods manufactures is a titanium model (Slam) that sells for 149. The cost of each Slam consists of: Job 100 produced 100 Slams, of which six were spoiled and classified as seconds. Seconds are sold to discount stores for 50 each. Required: 1. Under the assumption that the loss from spoilage will be distributed to all jobs produced during the current period, use general journal entries to (a) record the costs of production, (b) put spoiled goods into inventory, and (c) record the cash sale of spoiled units. 2. Under the assumption that the loss due to spoilage will be charged to Job 100, use general journal entries to (a) record the costs of production, (b) put spoiled goods into inventory, and (c) record the cash sale of spoiled units.
Stahman, Inc., estimates its hidden external failure costs using the Taguchi loss function. Stahlman produces plastic sheets that vary in thickness and grade. For one of its large-volume products, it was determined that k = 30,000 and T = 0.28 inches in diameter. A sample of four units produced the following values: Required: 1. Calculate the average loss per unit. 2. Assuming that 100,000 units were produced, what is the total hidden cost? 3. Assume that the multiplier for Stahmans hidden external failure costs is six. What are the measured external costs? Explain the difference between measured costs and hidden costs.
Recently, Ulrich Company received a report from an external consulting group on its quality costs. The consultants reported that the companys quality costs total about 21 percent of its sales revenues. Somewhat shocked by the magnitude of the costs, Rob Rustin, president of Ulrich Company, decided to launch a major quality improvement program. For the coming year, management decided to reduce quality costs to 17 percent of sales revenues. Although the amount of reduction was ambitious, most company officials believed that the goal could be realized. To improve the monitoring of the quality improvement program, Rob directed Pamela Golding, the controller, to prepare monthly performance reports comparing budgeted and actual quality costs. Budgeted costs and sales for the first two months of the year are as follows: The following actual sales and actual quality costs were reported for January: Required: 1. Reorganize the monthly budgets so that quality costs are grouped in one of four categories: appraisal, prevention, internal failure, or external failure. (Essentially, prepare a budgeted cost of quality report.) Also, identify each cost as variable (V) or fixed (F). (Assume that no costs are mixed.) 2. Prepare a performance report for January that compares actual costs with budgeted costs. Comment on the companys progress in improving quality and reducing its quality costs.
The Abrams Corporation incurred the following quality costs during the year: Inspections $ 35,400 Training $ 16,700 Quality planning $7,000 Maintenance $10,800 Rework $ 3,850 Warranty $8,690 Testing of equipment $8,000 Scrap $8,000 Lost sales $ 20,600 Downtime $ 10,400 Repairs $ 7,200 What are the total internal failure costs for the Abrams Corporation ?
Eagleson Company's quality cost report is to be based on the following data: Net cost of scrap $ 75,000 Liability arising from defective products $ 32,000 Warranty repairs and replacements $ 80,000 Re-entering data because of keying errors $ 75,000 Supplies used in testing and inspection $ 18,000 Quality data gathering, analysis, and reporting $ 62,000 Final product testing and inspection $ 21,000 Test and inspection of in-process goods $ 44,000 Systems development $ 45,000 What would be the total appraisal cost appearing on the quality cost report?
Lemmons Inc. has the following two activities: (1) Retesting reworked products, cost: $720,000. The retesting cost of the most efficient competitor is $225,000. (2) Welding subassembles, cost: $1,350,000 (67,500 welding hours). A benchmarking study reveals that the most efficient level for Lemmons would use 54,000 welding hours and entail a cost of $1,080,000.
XYZ Company made expenditures for the following: Costs in activities aimed at obtaining new knowledge P 10,000 Cost of developing and producing a prototype model 3,000 Cost of testing the prototype model for safety and environmental friendliness 30,000 Cost of revising designs for flaws in the prototype model 10,000 Salaries of employees, consultants and technicians involved in R and D 20,000 Marketing research to study consumer tastes 5,000 Advertising to establish recognition of the newly developed product 30,000 Cost of conference for the introduction of the newly developed product including fee of a model hired as endorser How much is recognized as research and development expense? _____________
Chemco Enterprises is the manufacturer of Ultra-Dry, a hydrophobic coating that will waterproof anything. Over a 5-year period, the costs associated with the pilot test product line were as follows: first cost of $41,000 and annual costs of $18,000. Annual revenue was $38,000 and used equipment was salvaged for $4,000. What rate of return did the company make on this product? The rate of return the company made on the product is
Charles Berkle is the manager of Nogain Manufacturing and is interested in doing a cost of quality analysis. The following cost and revenue data are available for the most recent year ended December 31. Sales revenue $ 250,000 Cost of goods sold 140,000 Warranty expense 20,000 Inspection costs 14,000 Scrap and rework 7,800 Product returns due to defects 6,000 Depreciation expense 10,000 Machine maintenance expense 2,700 Wage expense 35,000 Machine breakdown costs 4,000 Estimated lost sales due to poor quality 5,000 a. Classify each of these costs into the four quality cost categories and prepare a cost of quality report for Nogain. b. What percentage of sales revenue is being spent on prevention and appraisal activities? c. What percentage of sales revenue is being spent on internal and external failure costs?