Additional 20 minutes testing for each speaker $ 625,000 Negotiating and training suppliers to obtain higher-quality materials and on-time delivery 430,000 Redesigning the speakers to make them easier to manufacture 1,250,000 Loiselle expects this quality program to save costs as follows: Reduce warranty repair costs $ 275,000 Avoid inspection of raw materials 580,000 Avoid rework because of fewer defective units 825,000 of Lost profits due to disappointed customers Lost production time due to rework $ 920,000 278,000
Additional 20 minutes testing for each speaker $ 625,000 Negotiating and training suppliers to obtain higher-quality materials and on-time delivery 430,000 Redesigning the speakers to make them easier to manufacture 1,250,000 Loiselle expects this quality program to save costs as follows: Reduce warranty repair costs $ 275,000 Avoid inspection of raw materials 580,000 Avoid rework because of fewer defective units 825,000 of Lost profits due to disappointed customers Lost production time due to rework $ 920,000 278,000
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter2: Financial Statements And The Annual Report
Section: Chapter Questions
Problem 2.5DC: The Expenditure Approval Process Roberto is the plant superintendent of a small manufacturing...
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Classifying quality costs and using these costs to make decisions
Loiselle manufactures high-quality speakers. Suppose Loiselle is considering spending the following amounts on a new quality program:
It also expects this program to avoid lost profits from the following:
Requirements
- Classify each of these costs into one of the four categories of quality costs (prevention, appraisal, internal failure, or external failure).
- Should Loiselle implement the quality program? Give your reasons.
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