Question

Activity-Based Quality Costing Abernathy, Inc., produces two different generators and is concerned about their quality. The company has identified the following quality activities and costs associated with the two products: Generator A Generator B Units produced 167,400 347,700 1,710 800 3,430 880 Warranty work (units) Scrapped units (number) Inspection (hours) Quality training (hours) 3,380 1,750 82 82 Activities: Performing warranty work $810,730 Scrapping units 612,020 318,060 Inspecting Quality training 82,328 Required: 1. Calculate the quality cost per unit for each product, and break this unit cost into quality cost categories. If required, round your answers to the nearest cent. Generator A Generator B Generator A Unit cost $ Generator B Which of the two seems to have the lowest quality? Not enough information is given to answer

Answer 1

				Generator A		Generator B
Activities	Cost $	Cost Driver Usage	Activity Rate $	Cost Driver Usage	Cost $	Cost Driver Usage	Cost $
Performing warranty work	810730	2510	323	1710	552330	800	258400
Scrapping units	612020	4310	142	3430	487060	880	124960
Inspecting	318060	5130	62	3380	209560	1750	108500
Quality training	82328	164	502	82	41164	82	41164
Total cost $	1823138				1290114		533024
Divide by: Number of units produced					167400		347700
Unit cost $					7.71		1.53

Answer: Generator A

Generator A seems to have the lowest quality since the unit cost of quality for Generator A is higher at $7.71 than for Generator B at $1.53.