At the end of 1998, Barton Company recorded the following quality costs:
design review |
$75.000 |
product withdrawals |
25.000 |
Re-checking |
40.000 |
material inspection |
30.000 |
quality training |
40.000 |
Process evaluation |
28.000 |
The remaining raw materials |
45.000 |
Lost of sales |
30.000 |
rating of Product |
10.000 |
Returned items |
10.000 |
REQUESTED: 1. Make a quality cost report by listing costs according to categories. 2.Are there hidden costs in the report? Explain.
Step 1: | |
Particulars | Amount In $ |
Preventive | |
Design review | $75.000 |
Quality training | $40.000 |
Process evaluation | $28.000 |
$143.000 | |
Appraisal | |
Material Inspection | 30.000 |
30.000 | |
internal failure | |
Re checking | $40.000 |
Rating of product | $10.000 |
The remaining raw material | $45.000 |
$95.000 | |
External failure | |
Lost of sales | $30.000 |
Product withdrawal | $25.000 |
Returned items | $10.000 |
$65.000 |
Step 2 | |||||||
Hidden cost are external failure cost include cost of loss of customer, loyalty, image loss and brand damage | |||||||
For example in striving to return lost customers more resources are required for support. With no means | |||||||
provided for control of hidden external failure cost. Organisations activity can become unprofitable | |||||||
In the above report lost of sales is the hidden cost due to poor quality. |
At the end of 1998, Barton Company recorded the following quality costs: design review $75.000 product...
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