Question

Problem 1A-4 Quality Cost Report [LO1-7, LO1-8] 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: Conts (in thousands) Last This Year Year $ 630 $ 756 $ 420 $ 630 $ 588 $ $ 1.050 $ 1.680 210 420 $ 1.260 $ 1.176 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 $ $ 840 3,780 420 840 2.940 S $ $ $ $ 1,512 1,050 1,848 630 $ Sales have been fiat over the past few years, at $84,000,000 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 (ie 0.1234 should be entered as 12.34).) Florex Company Quality Cost Report Last Year This Year < Prev 20 of 20 !! Ne

Answer 1

Florex Company
Quality Cost Report
	Last Year			This Year
	Amount (In Thousands)	Percent of Sales		Amount (In Thousands)	Percent of Sales
Prevention Cost
Quality Engineering	$420	0.50%		$630	0.75%
Statistical Process Control	0	0.00%		$420	0.50%
System Development cost	$840	1.00%		$840	1.00%
Total Prevention Cost	$1,260	1.50%		$1,890	2.25%
Appraisals Cost
Inspection Cost	$630	0.75%		$756	0.90%
Depreciation of Testing Equipment	$588	0.70%		$210	0.25%
Supplies used in testing	$42	0.05%		$42	0.05%
Product Testing	$840	1.00%		$1,848	2.20%
Total Appraisals Cost	$2,100	2.50%		$2,856	3.40%
Internal Failure Cost
Rework Labor	$1,050	1.25%		$1,680	2.00%
Net Cost of scrap	$420	0.50%		$1,050	1.25%
Product Recalls	$2,940	3.50%		$840	1.00%
Disposals of defective Products	$630	0.75%		$420	0.50%
Total Internal Failure Cost	$5,040	6.00%		$3,990	4.75%
External Failure Cost
Cost of Field service	$1,260	1.50%		$1,176	1.40%
Warranty repairs	$3,780	4.50%		$1,512	1.80%
Total External Failure Cost	$5,040	6.00%		$2,688	3.20%

Sales	84000
Florex Company
Quality Cost Report
	Last Year			This Year
	Amount (In Thousands)	Percent of Sales		Amount (In Thousands)	Percent of Sales
Prevention Cost
Quality Engineering	420	=C8/84000		630	=F8/84000
Statistical Process Control	0	=C9/84000		420	=F9/84000
System Development cost	840	=C10/84000		840	=F10/84000
Total Prevention Cost	=SUM(C8:C10)	=SUM(D8:D10)		=SUM(F8:F10)	=SUM(G8:G10)
Appraisals Cost
Inspection Cost	630	=C14/84000		756	=F14/84000
Depreciation of Testing Equipment	588	=C15/84000		210	=F15/84000
Supplies used in testing	42	=C16/84000		42	=F16/84000
Product Testing	840	=C17/84000		1848	=F17/84000
Total Appraisals Cost	=SUM(C14:C17)	=SUM(D14:D17)		=SUM(F14:F17)	=SUM(G14:G17)
Internal Failure Cost
Rework Labour	1050	=C21/84000		1680	=F21/84000
Net Cost of scrap	420	=C22/84000		1050	=F22/84000
Product Recalls	2940	=C23/84000		840	=F23/84000
Disposals of defective Products	630	=C24/84000		420	=F24/84000
Total Internal Failure Cost	=SUM(C21:C24)	=SUM(D21:D24)		=SUM(F21:F24)	=SUM(G21:G24)
External Failure Cost
Cost of Field service	1260	=C28/84000		1176	=F28/84000
Warranty repairs	3780	=C29/84000		1512	=F29/84000
Total External Failure Cost	=SUM(C28:C29)	=SUM(D28:D29)		=SUM(F28:F29)	=SUM(G28:G29)