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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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Bradshaw Company reported sales of $5,000,000 in 20X1. At the end of the fiscal year (June 30, 20X1), the following quality costs were reported:

Chapter 13, Problem 41E, Bradshaw Company reported sales of 5,000,000 in 20X1. At the end of the fiscal year (June 30, 20X1),

Required:

  1. 1. Prepare a quality cost report.
  2. 2. Prepare a graph (pie chart or bar graph) that shows the relative distribution of quality costs, and comment on the distribution.
  3. 3. Assuming sales of $5,000,000, by how much would profits increase if quality improves so that quality costs are only 3% of sales?

1.

To determine

Prepare quality cost report.

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 certification43,500100,0002%
Quality training56,500
Detection costField testing54,000140,0002...

2.

To determine

Construct a category wise pie chart.

3.

To determine

Identify the increase in profit if quality costs are 3% of sales.

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