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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Quality Cost Report

Loring Company had total sales of $2,400,000 for fiscal 20X1. The costs of quality-related activities are given below.

Chapter 13, Problem 28BEB, Quality Cost Report Loring Company had total sales of 2,400,000 for fiscal 20X1. The costs of

Required:

  1. 1. Prepare a quality cost report, classifying costs by category and expressing each category as a percentage of sales. What message does the cost report provide?
  2. 2. Prepare a bar graph and pie chart that illustrate each category’s contribution to total quality costs. Comment on the significance of the distribution.

1.

To determine

Construct a report categorizing quality costs and expressing them as a percentage of sales.

Explanation

Quality Cost:

Organizations are required to bear costs due to non-conformity of goods or services with the general specifications. These costs are termed as quality costs. Quality costs can be categorized into preventive costs, detective costs, internal failure costs and external failure costs.

Quality cost report:

CategoryQuality costAmount ($)Total ($)Percentage of sales (%)
Prevention costVendor certification14,00020,0000.83
Marketing research6,000
Detection costProcess acceptance14,00030,0001.25
Field testing16,000
Internal failure costRetesting30,000150,0006...

2.

To determine

Construct a bar graph and a pie chart illustrating each category’s contribution to total quality cost.

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