Question

In response to Intensive foreign competition, the management of Florex Company has attempted over the past year to Improve the quality of its products. A statistical process control system has been Installed and other steps have been taken to decrease the amount of warranty and other field costs, which have been trending upward over the past several years. Costs relating to quality and quality control over the last two years are given below. Inspection Quality engineering Depreciation of test equipment Rework labor Statistical process control Cost of field servicing Supplies used in testing Systems development Warranty repairs Net cost of scrap Product testing Product recalls Disposal of defective products Costs (in thousands) Last This Year Year 638 $ 1,386 278 $ 675 495 $ 278 1.260 $ 1.710 S 315 1,179 $ 1,98 45 $ 819 $ 900 $ 4.725 $ 1.350 $ 630 $ 1.530 $ 998 $ 1.800 $ 2.925 $ 998 $ 810 $ 819 Sales have been flat over the past few years, at $90.000.000 per year. A great deal of money has been spent in the effort to upgrade quality, and management is anxious to see whether or not the effort has been effective. Required: 1. Prepare a quality cost report that contains data for both this year and last year. (Enter amount values in thousands. Round your percentage answers to 2 decimal places (L.e 0.1234 should be entered as 12.34).) Florex Company Quality Cost Report Last Year Amount (in Percent of thousands) Sales This Year Amount in Percent of thousands) Sales Prevention costs: Total prevention costs Appraisal costs Total appraisal costs Internal failure costs: Total internal failure costs External failure costs Total external failure costs Total quality cost

Answer 1

(S in 000's) Florex Company Quality Cost Report :- Particulars Last year Amount $ % of sales This year Amount $ % of sales 0.30% 0.75% 270 810 0.90% 1.00% 675 900 315 1,890 0.00% 1.20% 0.35% 2.10% 1,080 0.70% 1.54% 1,386 1,800 630 990 45 495 2,160 54 1.10% 0.05% 0.55% 2.40% 2.00% 0.06% 0.30% 3.90% 270 3,510 Prevention costs :- Quality engineering Systems development Statistical process control Total Prevention costs Appraisal costs :: Inspection Product testing Supplies used in testing Depreciation of test equipment Total Appraisal costs Internal failure costs :- Net cost of scrap Rework labor Disposal of defective products Total Internal failure costs External failure costs :- Cost of field servicing Warranty repairs Product recalls Total External failure costs Total Quality costs 0.70% 1.70% 630 1,260 810 1.40% 1,530 1,710 810 4,050 0.90% 3.00% 1.90% 0.90% 4.50% 2,700 1.30% 1,170 4,725 2,925 8,820 14,760 5.25% 3.25% 9.80% 16.40% 1,080 1,350 990 3,420 12,870 1.20% 1.50% 1.10% 3.80 14.30%