Cost-of-Quality (COQ) Analysis; Nonfinancial Performance Measures (Note: This problemcan be solved as a spreadsheet application and should be set up on a spreadsheet if Problem 17-71 isalso assigned.) Acme Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its primary customers are aviation manufacturers and maintenance companies. The following table contains financial information pertaining to cost of quality (COQ) in 2019and 2020 (in thousands of dollars):[LO 17-5, 17-6]2019 2020Sales $16,000 $20,000Materials inspection 300 60In-process (production) inspection 160 125Finished product inspection 250 70Preventive equipment maintenance 20 60Scrap (net) 500 300Warranty repairs 700 450Product design engineering 150 270Vendor certification 10 60Direct costs of returned goods 275 80Training of factory workers 40 140Product testing—equipment maintenance 60 60Product testing labor 210 90Field repairs 70 40Rework before shipment 240 200Product-liability settlement 360 60Emergency repair and maintenance 200 75Final PDF to printerblo17029_ch17_713-774.indd 768 02/19/18 09:10 AM768 Part Three Operational-Level ControlRequired1. Classify the cost items in the table into cost-of-quality (COQ) categories.2. Calculate the ratio of each COQ category to revenues in each of the 2 years. (Round all answers to 2decimal places.)3. Comment on the results. In conjunction with answering this question, calculate and refer to the following results:a. Percentage change (to 2 decimal places) in total COQ as a percentage of sales, from 2019 to 2020;b. Total COQ in 2020 expressed as a percentage (to 2 decimal places) of 2019 sales dollars;c. Percentage change in total prevention costs (to 2 decimal places), 2019 to 2020;d. Percentage change in total appraisal costs (to 2 decimal places), 2019 to 2020;e. Percentage change in total internal failure costs (to 2 decimal places), 2019 to 2020;f. Percentage change in total external failure costs (to 2 decimal places), 2019 to 2020.4. In addition to the financial measures listed in the table, what nonfinancial measures might Acme monitor in its effort to achieve overall improvements in quality?5. Are financial or nonfinancial quality measures likely of more use to (a) managers or (b) operating personnel? Why?
Cost-of-Quality (COQ) Analysis; Nonfinancial Performance Measures (Note: This problem
can be solved as a spreadsheet application and should be set up on a spreadsheet if Problem 17-71 is
also assigned.) Acme Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its primary customers are aviation manufacturers and maintenance companies. The following table contains financial information pertaining to cost of quality (COQ) in 2019
and 2020 (in thousands of dollars):
[LO 17-5, 17-6]
2019 2020
Sales $16,000 $20,000
Materials inspection 300 60
In-process (production) inspection 160 125
Finished product inspection 250 70
Preventive equipment maintenance 20 60
Scrap (net) 500 300
Warranty repairs 700 450
Product design engineering 150 270
Vendor certification 10 60
Direct costs of returned goods 275 80
Training of factory workers 40 140
Product testing—equipment maintenance 60 60
Product testing labor 210 90
Field repairs 70 40
Rework before shipment 240 200
Product-liability settlement 360 60
Emergency repair and maintenance 200 75
Final PDF to printer
blo17029_ch17_713-774.indd 768 02/19/18 09:10 AM
768 Part Three Operational-Level Control
Required
1. Classify the cost items in the table into cost-of-quality (COQ) categories.
2. Calculate the ratio of each COQ category to revenues in each of the 2 years. (Round all answers to 2
decimal places.)
3. Comment on the results. In conjunction with answering this question, calculate and refer to the following results:
a. Percentage change (to 2 decimal places) in total COQ as a percentage of sales, from 2019 to 2020;
b. Total COQ in 2020 expressed as a percentage (to 2 decimal places) of 2019 sales dollars;
c. Percentage change in total prevention costs (to 2 decimal places), 2019 to 2020;
d. Percentage change in total appraisal costs (to 2 decimal places), 2019 to 2020;
e. Percentage change in total internal failure costs (to 2 decimal places), 2019 to 2020;
f. Percentage change in total external failure costs (to 2 decimal places), 2019 to 2020.
4. In addition to the financial measures listed in the table, what nonfinancial measures might Acme monitor in its effort to achieve overall improvements in quality?
5. Are financial or nonfinancial quality measures likely of more use to (a) managers or (b) operating personnel? Why?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Why is materials inspection a prevention costs rather than an appraisal costs?
by Bartleby Expert
