Question

Pintura Company implemented a quality improvement program and tracked the following for the five years: 20X1 20X2 20X3 20X4 Quality Costs $750,000 690,000 680,000 510,000 480,000 Actual Sales $3,000,000 3,000,000 3,400,000 3,400,000 4,000,000 Costs as a Percentage of Sales 25.00% 23.00 20.00 15.00 12.00 20X5 By cost category as a percentage of sales for the same period of time: Appraisal 1.50% External Failure 13.00% 10.50 20X1 20X2 20X3 20X4 20X5 Prevention 1.00% 2.00 2.50 3.00 3.50 Internal Failure 9.50% 8.50 7.50 4.50 2.50 2.00 3.00 7.00 4.00 3.50 2.50 Required: 1. Prepare a bar graph that reveals the trend in quality cost as a percentage of sales (time on the horizontal axis and percentages on the vertical). Comment on the message of the graph 2. Prepare a bar graph for each cost category as a percentage of sales. What does this graph tell you?

Answer 1

SOLUTION 1

30% $45,00,000.00 540,00,000.00 $35,00,000.00 $30,00,000.00 $25,00,000.00 $20,00,000.000 1515,00,000.00 $10,00,000.00 | 55,00,000.00 $0.00 20X1 QUALITY COST 20X2 20X3 ACTUAL SALES 20X4 20X5 COST AS PERCENTAGE OF SALES -

THE GRAPH GIVS THE MESSAGE THAT THE PERCENTAGE OF COST TO THE TOTAL SALES IS DECLINING YEAR BY YEAR WHICH SHOWS A FAVOURABLE POSITION FOR THE PINTURA COMPANY AS TO THE SUCESS OF EFFICIENT QUALITY IMPROVEMNET PROGRAM.

SOLUTION 2

COST AS PERCENTAGE OF SALES 20x1 20x2 20X4 20X5 20x3 YEAR PREVENTION APPRAISAL INTERNAL FAILURE EXTERNAL FAILURE ... Linear (PREVENTION) ......... Linear (APPRAISAL) Linear (INTERNAL FAILURE) ......... Linear (EXTERNAL FAILURE)

THIS GRAPH GIVES THE MESSAGE ABOUT PERCENTAGE OF COMPONENTS OF QUALITY COSTS TO THE ACTUAL SALES.

1. THE PREVENTION AND APPRAISAL COST AS A PERCENTAGE OF ACTUAL SALES ARE RISING ON A YEAR ON YEAR BASIS.WHICH IS NOT FAVOURABLE FOR THE COMPANY.

2. THE INTERNAL AND EXTERNAL FAILURE COST AS A PERCENTAGE OF ACTUAL SALES ARE DECLINING ON YEAR ON YEAR BASIS WHICH FAVOURABLE FOR THE COMPANY.