Distribution Center 1: Finished goods stocks of 30,500 lots for Apple with 2% electrical failure per lot and 25,600 lots for Samsung with 3.1% mechanical damage per lot. Distribution Center 2: Finished goods stocks of 27,500 lots for Apple with 1.78% electrical failure per lot and 34,500 lots for Samsung with 2.8% mechanical damage per lot The finished goods for Apple came from Site A with standard quantity per lot at 2,255 and finished goods for Samsung came from Site B with standard quantity per lot at 2,534 How much is internal failure cost if the manufacturing cost per unit for Apple is $1.85 and Samsung cost per unit at $1.25 a b. Assuming the finished goods were accidentally shipped to customers without knowing the quality issue, how much is the external failure cost if the selling price per unit for Apple product is $2.5 and it agreed with Philips that will only accept 500 defects per million units and at the same time the Samsung product selling price is at $2.10 per unit and will only accept 2500 defects per million units

Distribution Center 1: Finished goods stocks of 30,500 lots for Apple with 2% electrical failure per lot and 25,600 lots for Samsung with 3.1% mechanical damage per lot. Distribution Center 2: Finished goods stocks of 27,500 lots for Apple with 1.78% electrical failure per lot and 34,500 lots for Samsung with 2.8% mechanical damage per lot The finished goods for Apple came from Site A with standard quantity per lot at 2,255 and finished goods for Samsung came from Site B with standard quantity per lot at 2,534 How much is internal failure cost if the manufacturing cost per unit for Apple is $1.85 and Samsung cost per unit at $1.25 a b. Assuming the finished goods were accidentally shipped to customers without knowing the quality issue, how much is the external failure cost if the selling price per unit for Apple product is $2.5 and it agreed with Philips that will only accept 500 defects per million units and at the same time the Samsung product selling price is at $2.10 per unit and will only accept 2500 defects per million units

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter14: Quality And Environmental Cost Management

Section: Chapter Questions

Problem 2CE

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In 2011, Milton Thayne, president of Carbondale Electronics, received a report indicating that quality costs were 31 percent of sales. Faced with increasing pressures from imported goods, Milton resolved to take measures to improve the overall quality of the companys products. After hiring a consultant in 20x0, the company began an aggressive program of total quality control. At the end of 20x5, Milton requested an analysis of the progress the company had made in reducing and controlling quality costs. The Accounting Department assembled the following data: Required: 1. Compute the quality costs as a percentage of sales by category and in total for each year. 2. Prepare a multiple-year trend graph for quality costs, both by total costs and by category. Using the graph, assess the progress made in reducing and controlling quality costs. Does the graph provide evidence that quality has improved? Explain. 3. Using the 20x1 quality cost relationships (assume all costs are variable), calculate the quality costs that would have prevailed in 20x4. By how much did profits increase in 20x4 because of the quality improvement program? Repeat for 20x5.
Using the Taguchi quality loss function, an average loss of 20 per unit is calculated. During the year, 25,000 units were produced. Which of the following statements represents the correct application of the Taguchi loss function? a. The hidden costs of internal failure are 500,000. b. The hidden costs of external failure are 500,000. c. The costs of detection activities are 20 per unit inspected. d. The total external costs are 500,000.
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.
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?
NUBD Company’s quality cost report is to be based on the following data: Quality circles- 57,000 Downtime caused by quality problems- 98,000 Debugging software errors- 92,000 Statistical process control activities- 68,000 Test and inspection of in-process goods- 24,000 Final product testing and inspection- 66,000 Cost of field servicing and handling complaints- 87,000 Product recalls- 72,000 Maintenance of test equipment- 75,000 What would be the total internal failure cost appearing on the quality cost report?
Davis, Inc., had the following quality costs for the years ended December 31, 20x4 and 20x5: 20x4 20x5 Prevention costs: Quality audits $63,000 $94,500 Vendor certification 118,500 177,750 Appraisal costs: Product acceptance $94,000 $141,000 Process acceptance 113,000 117,500 Internal failure costs: Retesting $98,000 $88,000 Rework 204,000 179,000 External failure costs: Recalls $130,000 $104,000 Warranty 300,000 290,000 At the end of 20x4, management decided to increase its investment in control costs by 50 percent for each category’s items with the expectation that failure costs would decrease by 20 percent for each item of the failure categories. Sales were $12,500,000 for both 20x4 and 20x5. Required: 1. Calculate the budgeted costs for 20x5. $fill in the blank 4e356df4cfd006b_1…
NUBD Company’s quality cost report is to be based on the following data: Disposal of defective products- 42,000 Supervision of testing and inspection activities- 73,000 Statistical process control activities- 78,000 Cost of field servicing and handling complaints- 53,000 Re-entering data because of keying errors- 46,000 Warranty repairs and replacements- 87,000 Supplies used in testing and inspection- 87,000 Quality circles- 27,000 Downtime caused by quality problems- 14,000 What would be the total appraisal cost appearing on the quality cost report?
Heracross Inc quality cost report is based on the following data: Test and inspection of in-process goods ₱ 38,000 Quality training 56,000 Product recalls 10,000 Net cost of scrap 98,000 Cost of handling complaints 5,000 Final product testing and inspection 89,000 Returns arising from quality problems 25,000 Statistical process control activities 83,000 Liability arising from defective products 21,000 Downtime caused by quality problems 78,000 Quality data gathering, analysis, and reporting 90,000 Technical support provided to suppliers 50,000 Disposal of defective products 76,000 Lost sales due to poor quality 11,000 ₱______________ would be the Total External Failure Cost appearing on the quality cost report.
Ryerson Company has three sales departments, each contributing the following percentages of total sales: clothing, 50%; hardware, 30%; and household sundries about 20%. In the past, the clothing, hardware, and household sundries department had error rates of about 2%, 5% and 2.5%. A random corporate audit has found a weekly damaged goods rate of sufficient magnitude to alarm Ryerson’s management. The probability (rounded) that this rate occurred in the clothing department is (M) a. 50% b. 1% c. 25% d. 33.33%
The computer system for Number 14, LLC, a manufacturer of basketball jerseys, fell victim to an internet virus. The manager was able to determine from various sources that 2,000 more yards were used in the production of 20,000 jerseys last period than purchased. Records show that the total direct material variances was $40,000 favorable. The direct material price variance was documented to be $120,000 unfavorable, which resulted from the actual cost per yard of direct material being $2 higher than the expected cost of $16 per yard. Additional documentation could not be found for the direct materials quantity variance. The amount of yards the company expected to use per jersey is A. 3.6125 yards B. 3.6714 yards C. 3.6000 yards D. 3.3875 yards E. 3.5000 yards
Forensic Specialists compiled the following information for its first quarter cost of quality report: Sales $ 5,650,000 Cost of goods sold $ 3,390,000 Disposing of scrap $ 240,200 Quality training $ 89,000 Inspecting materials on delivery $ 285,000 Performance reviews $ 84,750 Resolving customer complaints $ 36,920 Certifying suppliers $ 150,000 The relevant percentage to be used to express appraisal activities at Forensic Specialists is: Multiple Choice 2.95%. 1.50%. 6.48%. 36.60%.
The manager at East Coast Manufacturing organizes costs to prepare the Costs of Quality report. The manger compiled the following data: Employee training $161,000 Warranty costs $185,000 Rework $263,000 Product testing $190,000 Cost of rejected units $40,000 Sales return processing costs $35,000 Lost profits from lost sales $720,000 Inspection at State I of Production $100,000 Preventative maintenance $105,000 Improved equipment $115,000 What of the following cost is the total cost of quality the manager should use to report the costs in the internal failure cost category? Question…