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:

- tv - - Costs (in thousands) Last This Year Year $ 660 $ 1,215 3e0 $ 600 300 $ 225 980 $ 1,500 $ 300 ,200 $ 1,050 30 60 980 750 3,375 1,350 450 $ 980 1,119 $ 1,350 $ 2,625 750 750 $ 750 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 - - - tv tv tv tv -

Sales have been flat over the past few years, at $75,000,000 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 (i.e 0.1234 should be entered as 12.34).)

I don’t know why the Total Quality Cost is shown answer wrong because I did the calculation in this way:

I add Total prevention cost $1200+Total apprise cost $990+Total internal failure cost $1350+ total external failure cost $7200=$10740. For

Please could you help.. thank you.

Answer 1

Name of the Cost	Last year		This Year
Amount in Thousands ($)	Sales		Amount in Thousands ($)	Sales
Prevention Costs
Systems development	900	1.20		750	1.00
Statistical Process Control	0	0.00		300	0.40
Quality Engineering	300	0.40		600	0.80
Total Prevention Costs	1200	1.60		1650	2.20
Appraisal Costs
Inspection Cost	660	0.88		1215	1.62
product testing	1110	1.48		1350	1.80
Depreciation of test equipment	300	0.40		300	0.40
Supplies used in testing	30	0.04		60	0.08
Total Appraisal Costs	2100	2.80		2925	3.90
Internal failure Costs
Rework Labour	900	1.20		1500	2.00
Net cost of scrap	450	0.60		900	1.20
Disposal of defective products	750	1.00		750	1.00
Total Internal Failure Costs	2100	2.80		3150	4.20
External Failure Costs
Warranty repairs	3375	4.50		1350	1.80
Cost of field servicing	1200	1.60		1050	1.40
product recalls	2625	3.50		750	1.00
Total External Failure Costs	7200	9.60		3150	4.20
Total Costs	12600	16.8		10875	14.50