Question

The Bulldog Company incurred the following quality-related costs:

2016 2017

Calibration $190,000 $120,000

Product design 180,000 210,000

Product liability 150,000 90,000

Product recalls 480,000 240,000

Retesting 300,000 240,000

Rework 390,000 120,000

Testing 60,000 180,000

Training 90,000 120,000

Warranty repairs 180,000 90,000

1. Calculate for each of the two years: • Total prevention costs • Total appraisal costs • Total internal failure costs • Total external failure costs 2. Provide two recommendations for improving the disclosure of COQ data for the current data set (i.e., providing more informative disclosures). 3. Based on the data in this exercise, and your solution to Requirement 1, what observations can you offer regarding COQ spending over the two-year period?

Answer 1

Answer with working is given below

2017 Statement showing "Total Cost of Quality" 2016 Particulars of Cost Cost of Quality Prevention Cost Product Design $180,000 Training $90,000 $210,000 $120,000 $270,000 $330,000 Total Prevention Costs Appraisal Cost Calibration Testing $190,000 $60,000 $120,000 $180,000 $250,000 $300,000 Total Appraisal Costs Internal Failure Costs Rework Retesting $390,000 $300,000 $120,000 $240,000 $690,000 $360,000 Total Internal Failure Costs External Failure Costs Product Liability Product Recalls Warranty repairs $150,000 $480,000 $180,000 $90,000 $240,000 $90,000 Total External Failure Costs $810,000 $420,000 Total Quality cost $2,020,000 $1,410,000 2. 2 recommendations to improve the disclosure of COQ Data - Analyse Quality Cost as % of Sales - Analysis Quality cost as % of Total Quality Cost - Compare with trend analysis over 2 years 3. Total Quality cost has lowered in 2017 over 2016 Company has spent additional quality cost on Prevention and appraisal in 2017 Hence Cost of Internal Failure and External Failure has lowered in 2017 20% Total Prevention Costs Total Appraisal Costs Total Internal Failure Costs Total External Failure Costs Total Cost of Quality 2016 2017 $270,000 $330,000 $250,000 $300,000 $690,000 $360,000 $810,000 $420,000 $2,020,000 $1,410,000 Change % change $60,000 22% $50,000 $330,000 -48% $390,000 -48% $610,000 -30% |