Question

Julia, president of Roo Inc. has been concerned about the growth in costs over the last several years. Julia asked the controller to perform an activity analysis to gain a better insight into these costs. The activity analysis revealed the following: Activity Activity Cost Correcting invoice errors (invoices have been printed-not mailed) $25,000 Disposing of scrap (defective units) 39,000 Shipping late production with Federal Express (at company’s cost) 33,000 Final inspection 20,000 Inspecting work in process 30,000 Preventative machine maintenance 18,000 Responding to customer quality complaints 18,000 Total $183,000 Using this information prepare a cost of quality report (as suggested by the template below).

Quality Cost Classification	Quality Cost	Percent of Total quality cost	Percent of total Sales
Total

Assume sales for the period were $750,000. Quality Cost Classification Quality Cost Percent of Total quality cost Percent of total Sales Total

Answer 1

Quality Cost Classification	Quality Costs	Percent of total Quality Cost	Percent of Total Sales
Internal Failure Cost	Correcting Invoice Errors	13.66%($25000*100/$183000)	12.93 % ($97000*100/$750000)
Internal Failure Cost	Disposing of Scrap	21.31%($39000*100//$183000)
Internal Failure Cost	Shipping Late Production	18.03%($33000*100//$183000)
Appraisal Cost	Final Inspection	10.93%($20000*100//$183000)	6.67 % ($50000*100/$750000)
Appraisal Cost	Inspecting Work-in-process	16.39%($30000*100//$183000)
Prevention Cost	Preventive machine Maintenance	9.84%($18000*100//$183000)	2.4 % ($18000*100/$750000)
External Failure Cost	Responding to customer quality complaints	9.84%($18000*100//$183000)	2.4 % ($18000*100/$750000)