EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 8220103631723
Author: Rajan
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 19, Problem 19.28E
Nonfinancial measures of quality, manufacturing cycle efficiency. (CMA, adapted) Turnkey Manufacturing evaluates the performance of its production managers based on a variety of factors, including cost, quality, and cycle time. The following are nonfinancial measures for quality and time for 2016 and 2017 for its only product:
Nonfinancial Quality Measures | 2016 | 2017 |
Number of returned goods | 500 | 1,000 |
Number of defective units reworked | 2,500 | 2,000 |
Annual hours spent on quality training per employee | 36 | 54 |
Number of units delivered on time | 20,000 | 34,000 |
Annual Totals | 2016 | 2017 |
Units of finished goods shipped | 25,000 | 1,800 |
Average total hours worked per employee | 40,000 | 1,800 |
The following information relates to the average amount of time needed to complete an order:
Time to Complete an Order | 2016 | 2017 |
Wait time | ||
From customer placing order to order being received by production | 14 | 10 |
From order received by production to machine being set up for production | 9 | 7 |
Inspection time | 5 | 3 |
Process time | 4 | 4 |
Move time | 2 | 2 |
- 1. Compute the manufacturing cycle efficiency for an order for 2016 and 2017.
Required
- 2. For each year 2016 and 2017, calculate the following:
- a. Percentage of goods returned
- b. Defective units reworked as a percentage of units shipped
- c. Percentage of on-time deliveries
- d. Percentage of hours spent by each employee on quality training
- 3. Evaluate management’s performance on quality and timeliness in 2016 and 2017.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Techno
Instruments uses a manufacturing costing system with one direct-cost category (direct materials) and three indirect-cost categories:
a.
Setup, production-order, and materials-handling costs that vary with the number of batches
b.
Manufacturing-operations costs that vary with machine-hours
c.
Costs of engineering changes that vary with the number of engineering changes made
In response to competitive pressures at the end of
2016,
Techno
Instruments used value-engineering techniques to reduce manufacturing costs. Actual information for
2016
and
2017
is as follows:
2016
2017
Setup, production-order, and materials-handling costs per batch
$8,600
$7,800
Total manufacturing-operations cost per machine-hour
$59
$53
Cost per engineering change
$18,750
$14,000
The management of Techno Instruments wants to evaluate whether value engineering has succeeded in reducing the target manufacturing cost per unit of one…
Berlin Corp. makes a special-purpose machine called HTW used in the textile industry. Berlin Corp. has designed the HTW machine for 2017 to be distinct from its competitors. It has been generally regarded as a superior machine. Berlin Corp. presents the following data for 2016 and 2017.)(see picture)
Berlin Corp. produces no defective machines, but it wants to reduce direct materials usage per HTW machine in 2017. Conversion costs in each year depend on production capacity defined in terms of HTW units that can be produced, not the actual units produced. Selling and customer- service costs depend on the number of customers that Berlin Corp. can support, not the actual number of customers it serves. Berlin Corp. has 75 customers in 2016 and 80 customers in 2017.
2(a). Calculate the growth component from 2016 to 20172(b). Calculate the price-recovery component from 2016 to 2017 2(c). Calculate the growth productivity component from 2016 to 2017
Strategic Cost Management
NUBD Inc. manufactures clothing and sells these products to retail outlets. The following costs were incurred in performing quality activities at NUBD during the year:
Product recall activities- 370,000
Quality training activities- 240,000
Quality improvement activities- 154,000
Warranty claim activities- 109,000
Quality inspection and testing activities- 61,000
Rework activities- 38,000
Quality data collection and reporting activities- 16,000
What is the total of the prevention costs for NUBD?
Chapter 19 Solutions
EBK HORNGREN'S COST ACCOUNTING
Ch. 19 - Describe two benefits of improving quality.Ch. 19 - Prob. 19.2QCh. 19 - Name two items classified as prevention costs.Ch. 19 - Give two examples of appraisal costs.Ch. 19 - Distinguish between internal failure costs and...Ch. 19 - Describe three methods that companies use to...Ch. 19 - Companies should focus on financial measures of...Ch. 19 - Give two examples of nonfinancial measures of...Ch. 19 - Give two examples of nonfinancial measures of...Ch. 19 - When evaluating alternative ways to improve...
Ch. 19 - Distinguish between customer-response time and...Ch. 19 - Prob. 19.12QCh. 19 - Give two reasons why delays occur.Ch. 19 - Companies should always make and sell all products...Ch. 19 - Prob. 19.15QCh. 19 - Rector Corporation is examining its quality...Ch. 19 - Six Sigma is a continuous quality improvement...Ch. 19 - Costs of quality. (CMA, adapted) Osborn, Inc.,...Ch. 19 - Costs of quality analysis. Adirondack Company...Ch. 19 - Costs-of-quality analysis. Safe Travel produces...Ch. 19 - Costs of quality, quality improvement. iCover...Ch. 19 - Prob. 19.22ECh. 19 - Prob. 19.23ECh. 19 - Waiting time. Its a Dogs World (IDW) makes toys...Ch. 19 - Waiting time, service industry. The registration...Ch. 19 - Waiting time, cost considerations, customer...Ch. 19 - Nonfinancial measures of quality and time. For the...Ch. 19 - Nonfinancial measures of quality, manufacturing...Ch. 19 - Statistical quality control. Harvest Cereals...Ch. 19 - Quality improvement, Pareto diagram,...Ch. 19 - Quality improvement, relevant costs, and relevant...Ch. 19 - Quality improvement, relevant costs, and relevant...Ch. 19 - Waiting times, manufacturing cycle times. The...Ch. 19 - Prob. 19.34PCh. 19 - Manufacturing cycle times, relevant revenues, and...Ch. 19 - Compensation linked with profitability, waiting...Ch. 19 - Ethics and quality. Weston Corporation...Ch. 19 - Prob. 19.38P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- CMA-ADAPTED PERFORMANCE MEASURES The Star Paper Division of Royal Industries is located near Los Angeles. A major expansion of the divisions only plant was completed in April 2015. The expansion consisted of an addition to the existing building, additions to the production line machinery, and the replacement of obsolete and fully depreciated equipment that was no longer efficient or cost-effective. On May 1, 2015, George Harris became manager of Star. Harris had a meeting with Marie Fortner, vice president of operations for Royal, who explained to Harris that the company measured the performance of divisions and division managers on the basis of return on gross assets (ROA). When Harris asked if other measures were used in conjunction with ROA, Fortner replied, Royals top management prefers to use a single performance measure. Star should do well this year now that it has expanded and replaced all of that old equipment. You should have no problem exceeding the divisions historical rate. Ill check with you at the end of each quarter to see how you are doing. Fortner called Harris after the first quarter results were completed because Stars ROA was considerably below the historical rate for the division. Harris told Fortner that he did not believe that ROA was a valid performance measure for Star. Fortner indicated that she would discuss this with others at headquarters and get back to Harris. However, there was no further discussion of the use of ROA but only reports on divisional performance at the end of the second and third quarters. Now that the fiscal year has ended, Harris has received the memorandum in the figure designated for Problem 14. PROBLEM 14: PERFORMANCE MEASURES TO: George Harris, Star Paper Division FROM: Marie Fortner, Royal Industries SUBJECT: Divisional Performance The operating results for the fourth quarter and for our fiscal year ended on April 30 are now complete. Your fourth quarter return on gross assets was only 9 percent, resulting in a return for the year of slightly under 11 percent. I recall discussing your low return after the first quarter and reminding you after the second and third quarters that this level of return is not considered adequate for the Star Paper Division. The return on gross assets at Star has ranged from 15 to 18 percent for the past five years. An 11 percent return may be acceptable at some of Royals other divisions, but not at a proven winner like Star, especially in light of your recently improved facility. Please arrange to meet with me in the near future to discuss ways to restore Stars return on gross assets to its former level. Harris is looking forward to meeting with Fortner as he plans to pursue the discussion about the appropriateness of ROA as a performance measure for Star. While the ROA for Star is below historical levels, the divisions profits for the year are higher than at any previous time. Harris is going to recommend that ROA be replaced with multiple criteria for evaluating performancenamely, dollar profit, receivable turnover, and inventory turnover. Required a. Identify general criteria that should be used in selecting performance measures to evaluate operating managers. b. Describe the probable cause of the decline in the Star Paper Divisions return on gross assets during the fiscal year ended April 30, 2007. c. On the basis of the relationship between Fortner and Harris, as well as the memorandum from Fortner, discuss apparent weaknesses in the performance evaluation process at Royal Industries. d. Discuss whether the multiple performance evaluation criteria that Harris suggested would be appropriate for the evaluation of the Star Paper Division.arrow_forwardIn 20X1, Don Blackburn, president of Price Electronics, received a report indicating that quality costs were 31% of sales. Faced with increasing pressures from imported goods. Don resolved to take measures to improve the overall quality of the companys products. After hiring a consultant in 20X1, the company began an aggressive program of total quality control. At the end of 20X5, Don 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.arrow_forwardIn 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.arrow_forward
- The accounting system for Dolment Co. reflected the following quality costs for Year 1 and Year 2: Year 1 Year 2 Customer refunds for poor product quality $33,300 $29,000 Fitting machines for mistake-proof operations 8,460 11,800 Supply chain management activities 8,100 10,000 Waste disposal 39,600 36,000 Quality training 23,400 30,000 Litigation claims for product defects 72,900 64,000 b. Calculate the percentage change in each cost and for each category. (See attached)arrow_forwardPareto Chart and Cost of Quality Report for a Manufacturing Company The president of Mission Inc. has been concerned about the growth in costs over the last several years. The president asked the controller to perform an activity analysis to gain a better insight into these costs. The result of the activity analysis is summarized as follows: Activities Activity Cost Correcting invoice errors $11,250 Disposing of incoming materials with poor quality 9,000 Disposing of scrap 31,500 Expediting late production 27,000 Final inspection 22,500 Inspecting incoming materials 4,500 Inspecting work in process 22,500 Preventive machine maintenance 15,750 Producing product 67,500 Responding to customer quality complaints 13,500 Total $225,000 The production process is complicated by quality problems, requiring the production manager to expedite production and dispose of scrap. Required: 1. On paper or in a spreadsheet program, prepare a Pareto chart for each of the…arrow_forwardCost of qualityManagers at Walla-Walla LTD want to determine the company’s cost of quality. The following information has been gathered from the records for August: Defective units 9,000 Units reworked 1,800 Defective units returned 600 Appraisal costs $26,250 Cost per unit for rework $18 Prevention costs $127,500 Profit per good unit produced and sold $85 Profit per defective unit sold $43 Cost per unit for customer returns $14 Cost of warranty work $13,500 Compute the following:a. Lost profits from selling defective work $Answerb. Total costs of failure $Answerc. Total quality cost $Answerarrow_forward
- Matching cost-of-quality examples to categories Sammy, Inc. manufactures motor scooters. For each of the following examples of quality costs, indicate which of the following quality cost categories each example represents: prevention costs, appraisal costs, internal failure costs, or external failure costs. Preventive maintenance on machinery Direct materials, direct labor, and manufacturing overhead incurred to rework a defective scooter that is detected in-house through inspection Lost profits from lost sales if the company’s reputation is hurt because customers previously purchased a poor-quality scooter Cost of inspecting raw materials, such as chassis and wheels Working with suppliers to achieve on-time delivery of defect-free raw materials Cost of warranty repairs on a scooter that malfunctions at a customer’s location Costs of testing durability of the vinyl Cost to reinspect reworked scootersarrow_forwardThe 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…arrow_forwardWolsey Industries Inc. expects to maintain the same inventories at the end of 2016 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: 1 Estimated Fixed Cost Estimated Variable Cost (per unit sold) 2 Production costs: 3 Direct materials — $46.00 4 Direct labor — 40.00 5 Factory overhead $200,000.00 20.00 6 Selling expenses: 7 Sales salaries and commissions 110,000.00 8.00 8 Advertising 40,000.00 — 9 Travel 12,000.00 — 10 Miscellaneous selling expense 7,600.00 1.00 11 Administrative expenses: 12 Office and officers’ salaries 132,000.00 — 13 Supplies 10,000.00 4.00 14…arrow_forward
- T Formeloza Corp. has used a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of P20 per direct labor hour. The average monthly direct labor hours for its main product are 28,800 hours. T Formeloza Corp. wants to shift to ABC system in order to allocate quality control costs to its products in a more equitable manner. To start with, process value analysis was conducted. Quality control activities were determined, as well as the appropriate cost drivers and cost driver rates. The analysis yielded the following: Quantity for Main Product 40 classes Activity Cost Driver Rate Inspection of materials deliveries Inspection of goods in process Final inspection before delivery of finished goods Classes of materials P500 per class Number of units 10 per unit 24,000 units Number of orders 200 per order 200 orders The quality control cost that would be assigned to the main product using the traditional costing system is а. Р576,000 ь. Р720,000…arrow_forwardForensic 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%.arrow_forwardCharles Berkle is the manager of Nogain Manufacturing and is interested in doing a cost of quality analysis. The following cost and revenue data are available for the most recent year ended December 31. Sales revenue $ 250,000 Cost of goods sold 140,000 Warranty expense 20,000 Inspection costs 14,000 Scrap and rework 7,800 Product returns due to defects 6,000 Depreciation expense 10,000 Machine maintenance expense 2,700 Wage expense 35,000 Machine breakdown costs 4,000 Estimated lost sales due to poor quality 5,000 a. Classify each of these costs into the four quality cost categories and prepare a cost of quality report for Nogain. b. What percentage of sales revenue is being spent on prevention and appraisal activities? c. What percentage of sales revenue is being spent on internal and external failure costs?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegePrinciples of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
Inspection and Quality control in Manufacturing. What is quality inspection?; Author: Educationleaves;https://www.youtube.com/watch?v=Ey4MqC7Kp7g;License: Standard youtube license