Chris Mines is the manager of Lumble Manufacturing and is interested in doing a cost of quality analysis. The following cost and revenue data are available for the most recent year ended December 31:
Sales revenue | $250,000 |
Cost of goods sold | 140,000 |
Warranty expense | 22,000 |
Inspection costs | 12.000 |
Scrap and rework | 8.000 |
Product returns due to defects | 6.000 |
Depreciation expense | 10,000 |
Machine maintenance expense | 2,000 |
Wage expense | 35,000 |
Machine breakdown costs | 4,000 |
Estimated lost sales due to poor quality | 5.000 |
a. Classify each of the above costs into the four quality cost categories and prepare a cost of quality report for Lumble.
b. What percentage of sales revenue is being spent on prevention and appraisal activities?
c. What percentage of sales revenue is being spent on internal and external failure costs?
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