Question

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Industries manufactures freezers. Here is some information about its​ "LX17" line of freezers over the past​ year:

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Number of units manufactured and sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		3,200 units
Selling price per unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		$1,250
Variable manufacturing and selling costs per unit. . . . . . . . . . . . . . . . . . . . .		$750
Hours spent by engineers improving design. . . . . . . . . . . . . . . . . . . . . . . . . . . .		1,300
Testing and inspection hours per unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		0.5 hours
Percentage of units reworked in the plant after inspection. . . . . . . . . . . . . . . . .		6%
Average variable rework costs per refrigerator. . . . . . . . . . . . . . . . . . . . . . . . . .		$430
Percentage of units repaired under warranty at customers’ homes. . . . . . . . . .		5%
Average variable repair costs at customers’ homes per refrigerator. . . . . . . . . .		$500
Estimated lost sales due to quality reputation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		650 units
Design engineer’s labor rate (includes benefits and payroll taxes). . . . . . . . . . .		$65 per hour
Inspection costs per hour. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		$60 per hour

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Requirement 1. Prepare a Cost of Quality​ (COQ) report. In addition to calculating the total costs of each​ category, calculate the percentage of COQ category of the total COQ. ​(Round the percentage to the one tenth of a​ percent, X.X%. If a box is not used in the table leave the box​ empty; do not select a label or enter a​ zero.)

Gamma Cost of Quality Report	Costs	Total Costs of	Percentage of Total Costs
	Incurred	Quality	of Quality (Rounded)
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 costs of quality				%

Answer 1

Gamma Gamma Industries Quality Report
Cost of Quality	Total Cost of Quality		Percentage to Total cost of Quality
Prevention Costs:
Design Engineers Labour Cost ($65 X 1300 hrs)	$84,500		12.65%
Appraisal Costs:
Testing & Inspection Cost (3200 Units X 0.5 hour per unit X $60)	$96,000		14.37%
Internal Failure Costs:
Rework Cost (3200 Units X 6% X $430 per unit)	$82,560		12.36%
External Failure Costs:
Warranty Cost (3200 Units X 5% X $500)	$80,000		11.97%
Loss of Contribution due to loss of sales (650 units X ($1250-750)	$325,000		48.65%
TOTAL QUALITY COST	$668,060		100%