Question

The following represents the financial information for Domingo Corporation for two months.

	March			April
Sales revenue	$	540,000		$	440,000
Costs
Process inspection	$	1,800		$	1,890
Scrap		1,840			1,860
Quality training		20,700			13,400
Warranty repairs		4,300			4,700
Product testing equipment		7,300			6,700
Customer complaints		3,000			3,500
Rework		17,000			19,000
Preventive maintenance		11,800			9,300
Materials inspection		5,900			5,200
Field testing		10,000			13,800

Required:

a. Classify these items into Prevention, Appraisal, Internal failure, or External failure costs.

b. Calculate the ratio of the prevention, appraisal, internal failure, and external failure costs to sales for March and April.

Answer 1

Answer-a)-

DOMINGO CORPORATION
COST OF QUALITY REPORT
PARTICULARS	MARCH		APRIL
	$		$
Prevention Costs:-
Process Inspection	1800		1890
Quality training	20700		13400
Preventive maintenance	11800		9300
Material inspection	5900		5200
Total Preventive costs	40200		29790
Appraisal Costs:-
Product Testing equipment	7300		6700
Fielding teseting	10000		13800
Total Appraisal Costs	17300		20500
Internal Failure costs:-
Scrap	1840		1860
Rework	17000		19000
Internal Failure costs	18840		20860
External Failure costs:-
Warranty repairs	4300		4700
Customer complaints	3000		3500
Total External Failure costs	7300		8200
Total Cost of Quality (COQ)	83640		79350

b)-

DOMINGO CORPORATION
COST OF QUALITY REPORT
PARTICULARS	MARCH	%	APRIL	%
	$		$
Sales Revenue	540000		440000
Prevention Costs:-
Process Inspection	1800		1890
Quality training	20700		13400
Preventive maintenance	11800		9300
Material inspection	5900		5200
Total Preventive costs	40200	7.4	29790	6.8
Appraisal Costs:-
Product Testing equipment	7300		6700
Fielding teseting	10000		13800
Total Appraisal Costs	17300	3.2	20500	4.7
Internal Failure costs:-
Scrap	1840		1860
Rework	17000		19000
Internal Failure costs	18840	3.5	20860	4.7
External Failure costs:-
Warranty repairs	4300		4700
Customer complaints	3000		3500
Total External Failure costs	7300	1.4	8200	1.9
Total Cost of Quality (COQ)	83640	15.5	79350	18.0