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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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Classify the following quality costs as prevention costs, appraisal costs, internal failure costs external failure costs:

  1. 1. Scrap (created by defective units)
  2. 2. Certifying a vendor to ensure that quality pans are provided
  3. 3. Stopping work to control process malfunction
  4. 4. Replacing a defective product for a customer
  5. 5. Goods returned because they were defective
  6. 6. Inspecting a subassembly
  7. 7. Inspecting and testing prototypes
  8. 8. Reinspecting a reworked product
  9. 9. Packaging inspection
  10. 10. Lost sales because of recalled products
  11. 11. Recall to repair defective products
  12. 12. Process acceptance
  13. 13. Internal audit to ensure that quality guidelines and processes are being followed
  14. 14. Repairing products in the field
  15. 15. Providing engineering assistance to selected suppliers to improve their product quality
  16. 16. Correcting a design error discovered during product development
  17. 17. Settling a bodily injury lawsuit caused by a defective product
  18. 18. Customer complaint department
  19. 19. Quality control circles
  20. 20. Continuing supplier verification
  21. 21. Redesigning a product to eliminate a product defect
  22. 22. Lost sales because of product quality concerns

To determine

Categorize the given quality costs.

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.

Given quality costs are categorized as follows:

Quality CostsCategory
1. Scrap (created by defective units)Internal failure costQuality failure found internally
2. Certifying a vendor to ensure that quality parts are providedPrevention costEnsuring good quality to prevent quality failure
3. Stopping work to control process malfunctionInternal failure costWork loss due to process failure
4. Replacing a defective product for a customerExternal failure costCost incurred after delivery of product
5. Goods returned because they were defectiveExternal failure costCost incurred after delivery of product
6. Inspecting a subassemblyDetection costCost incurred to maintain quality
7. Inspecting and testing prototypesPrevention costCost incurred to ensure quality
8. Re-inspecting a reworked productInternal failure costInspection cost incurred for products that failed quality
9. Packaging inspectionDetection costCost incurred to sort
10. Lost sales because of recalled productsExternal failure costLoss incurred after delivery of products
11...

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