Managerial Accounting
16th Edition
ISBN: 9781259995484
Author: Ray Garrison
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 1.A, Problem 2E
EXERCISE 1A−2 Classification of Quality Costs LO1−7
A number of activities that are a part of a company’s quality
- Product testing.
- Product recalls.
- Rework labor and overhead.
- Quality circles.
- Downtime caused by defects.
- Cost of field servicing.
- Inspection of goods
- Quality engineering.
- Warranty repairs.
- Statistical process control.
- Net cost of scrap.
Depreciation of test equipment.- Returns and allowances from poor quality
- Disposal of defective products.
- Technical support to suppliers.
- Systems development.
- Warranty replacements.
- Field testing at customer site.
- Product design.
Required:
- Classify the costs associated with each of these activities into one of the following categories: prevention cost, appraisal cost, internal failure cost, or external failure cost.
- Which of the four types of costs in (1) above are incurred in an effort to keep poor quality of conformance from occurring? Which of the four of costs in (1) above are incurred because poor quality of conformance has occurred?
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Check out a sample textbook solutionStudents have asked these similar questions
On a Cost of Quality report, which of the following cost items should be classified as an internal failure cost?
Question 18 options:
Net cost of scrap
Customer returns of defective products
Training for quality control employees
Patent cost for a new product
QUESTION 13
Farber Company produces its product in three departments, Prepping, Machining, and Finishing. A customer recently returned a defective product that had not been machined properly. The company's accountant would classify the repair cost as an internal failure cost.
True
False
Requirement 1. Classify each cost as value-added, non-value-added, or in the gray area between.
a.
Materials and labor for servicing machine tools
b.
Rework costs
c.
Expediting costs caused by work delays
d.
Materials-handling costs
e.
Materials-procurement and inspection costs
f.
Preventive maintenance of equipment
g.
Breakdown maintenance of equipment
Requirement 2. For any cost classified in the gray area, assume
96%
is value-added and
4%
is non-value-added. How much of the total of all seven costs is value-added and how much is non-value-added?
Compute the total cost for the value-added and nonvalue-added costs, then compute what percentage of the total is value-added and how much is non-value-added.
Total percent
Total cost
of total costs
Value-added
%
Non-value-added
%
Total costs
Requirement 3.…
Chapter 1 Solutions
Managerial Accounting
Ch. 1.A - EXERCISE 1A1 Cost of Quality Terms LO17, LO18 A...Ch. 1.A - EXERCISE 1A2 Classification of Quality Costs LO17...Ch. 1.A - Prob. 3PCh. 1.A - PROBLEM 1A4 Quality Cost Report LO17, LO18 page 66...Ch. 1 - Prob. 1QCh. 1 - Define the following: (a) direct materials, (b)...Ch. 1 - Explain the difference between a product cost and...Ch. 1 - Distinguish between (a) a variable cost, (b) a...Ch. 1 - Prob. 5QCh. 1 - Define the following terms: (a) cost behavior and...
Ch. 1 - What is meant by an activity base when dealing...Ch. 1 - Managers often assume a strictly linear...Ch. 1 - Distinguish between discretionary fixed costs and...Ch. 1 - Does the concept of the relevant range apply to...Ch. 1 - What is the difference between a traditional...Ch. 1 - Prob. 12QCh. 1 - Prob. 13QCh. 1 - Prob. 14QCh. 1 - Prob. 1AECh. 1 - Prob. 2AECh. 1 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L012, L013, L014, L015, L016 Martinez Company’s...Ch. 1 - L01–1, L01–2, L01–3, L01–4, L01–5, L01–6
Martinez...Ch. 1 - L01–1, L01–2, L01–3, L01–4, L01–5, L01–6
Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 1 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6
Martinez...Ch. 1 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - EXERCISE 1—1 Identifying Direct and Indirect Costs...Ch. 1 - EXERCISE 1-2 Classifying Manufacturing Costs LO1-2...Ch. 1 - EXERCISE 1-3 Classifying Costs as Product or...Ch. 1 - EXERCISE 14 Fixed and Variable Cost Behavior LO14...Ch. 1 - Prob. 5ECh. 1 - EXERCISE 1—6 Traditional and Contribution Format...Ch. 1 - Prob. 7ECh. 1 - EXERCISE 18 Product Costs and Period Costs;...Ch. 1 - Prob. 9ECh. 1 - Prob. 10ECh. 1 - EXERCISE 1—11 Cost Behavior; Contribution Format...Ch. 1 - EXERCISE 1-12 Product and Period Cost Flows LO1–3...Ch. 1 - Prob. 13ECh. 1 - EXERCISE 1-14 Cost Classification 1O1–2, LO1–3,...Ch. 1 - Prob. 15ECh. 1 - EXERCISE 1–16 Cost Classifications for Decision...Ch. 1 - EXERCISE 1-17 Classifying Variable and Fixed Costs...Ch. 1 - PROBLEM 1-18 Direct and Indirect Costs; variable...Ch. 1 - PROBLEM 1-19 Traditional and Contribution Format...Ch. 1 - PROBLEM 120 Variable and Fixed Costs; Subtleties...Ch. 1 - Prob. 21PCh. 1 - Prob. 22PCh. 1 - PROBLEM 123 Cost Classification LO11, LO13, LO14...Ch. 1 - PROBLEM 1-24 Different Cost Classifications for...Ch. 1 - Prob. 25PCh. 1 - CASE 1-26 Cost Classification and Cost Behavior...Ch. 1 - Prob. 27C
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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
- 12. Cost of Quality and Value-Added/Non-Value-Added Reports for a Service Company Three Rivers Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Three Rivers are identified as follows: a. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added. Quality Control Activities Activity Cost Quality Cost Classification Value-Added/Non-Value-AddedClassification Billing error correction $28,400 Cable signal testing 78,400 Reinstalling service (installed incorrectly the first time) 61,100 Repairing satellite equipment 34,300 Repairing underground cable connections to the customer 18,500 Replacing old technology cable with higher quality cable 98,800 Replacing old technology signal switches with higher quality switches 112,900 Responding to customer home repair requests 34,100 Training employees…arrow_forwardWhich of the following quality costs is an internal failure cost? a. Inspection of reworked units b. Lost sales because of products failing to meet specifications c. Replacing a defective product d. Training production line workers in new quality proceduresarrow_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 activity analysis revealed the following: The production process is complicated by quality problems, requiring the production manager to expedite production and dispose of scrap. Instructions 1. Prepare a Pareto chart of the company activities. 2. Classify the activities into prevention, appraisal, internal failure, external failure, and not costs of quality (producing product). Classify the activities into value-added and non-value-added activities. 3. Use the activity cost information to determine the percentages of total costs that are prevention, appraisal, internal failure, external failure, and not costs of quality. 4. Determine the percentages of total costs that are value-added and non-value-added. 5. Interpret the information.arrow_forward
- Without redrawing the figures, discuss how Figure 12.3 (pg. 464), Figure 12.4 (pg. 465), Figure 12.6 (pg. 466), Figure 12.7 (pg. 468), and Figure 12.9 (pg. 470) would change as a result of purchasing a technical product that could not be inspected in the receiving department but had to undergo quality control testing before being accepted.arrow_forwardRefer to Exercise 12.14. Suppose that for 20x2, Sanford, Inc., has chosen suppliers that provide higher-quality parts and redesigned its plant layout to reduce material movement. Additionally, Sanford implemented a new setup procedure and provided training for its purchasing agents. As a consequence, less setup time is required and fewer purchasing mistakes are made. At the end of 20x2, the information shown on page 680 is provided. Required: 1. Prepare a report that compares the non-value-added costs for 20x2 with those of 20x1. 2. What is the role of activity reduction for non-value-added activities? For value-added activities? 3. Comment on the value of a trend report.arrow_forwardRefer to Exercise 12.8. Suppose that clerical error is the common root cause of the non-value-added activities. Paying bills is a subprocess that belongs to the procurement process. The procurement process is made up of three subprocesses: purchasing, receiving, and paying bills. Required: 1. What is the definition of a process? Identify the common objective for the procurement process. Repeat for each subprocess. 2. Now, suppose that Thayne decides to attack the root cause of the non-value-added activities of the bill-paying process by improving the skills of its purchasing and receiving clerks. As a result, the number of discrepancies found drops by 30 percent. Discuss the potential effect this initiative might have on the bill-paying process. Does this initiative represent process improvement or process innovation? Explain.arrow_forward
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