Problem

Dust Buster’s Inc. manufactures two types of small hand-operated vacuum cleaners. Dust Bus...

Dust Buster’s Inc. manufactures two types of small hand-operated vacuum cleaners. Dust Busters is concerned about quality issues and has compiled the following information for the past year associated with the two vacuums.

 

Heavy Duty

Regular

Activity Costs

Units produced

160,000

320,000

 

Warranty work (units)

1,200

620

$118,300

Recalled units

1,600

450

112,750

Reworked units

1,900

520

55,660

Inspection hrs. (incoming materials)

1,530

680

30,940

Inspection hrs. (completed units)

1.720

820

40,640

Quality training hrs

110

100

31,500

Total Activity Costs

 

 

$389,790

Find the quality cost per unit for each product. (Round your answer to two decimal places.) Which product has higher quality costs? How might a manager use this quality information to make decisions (e.g., about the production process or about suppliers) related to the value chain?

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