Cost-of-Quality (COQ) Analysis The Duncan Materials Company manufactures and sells synthel coatings that can withstand high temperatures. Its primary customers are aviation manufacture and maintenance companies. The following table contains financial information pertaining to co of quality (COQ) in 2010 and 2011 in thousands of dollars:
| 2010 | 2011 |
Sales | $15,000 | $18,750 |
Materials inspection | 300 | 60 |
Production inspection | 160 | 125 |
Finished product inspection | 225 | 70 |
Preventive equipment maintenance | 20 | 60 |
Scrap (net) | 500 | 300 |
Warranty repairs | 700 | 400 |
Product design engineering | 150 | 270 |
Vendor certification | 10 | 60 |
Direct costs of returned goods | 250 | 80 |
Training of factory workers | 40 | 140 |
Product testing—equipment maintenance | 60 | 60 |
Product testing labor | 210 | 90 |
Field repairs | 70 | 30 |
Rework before shipment | 240 | 180 |
Product-liability settlement | 360 | 60 |
Emergency repair and maintenance | 190 | 60 |
Required
1. Classify the cost items in the table into cost-of-quality (COQ) categories.
2. Calculate the ratio of each COQ category to revenues in each of the two years.
3. Comment on the results.
4. In addition to the financial measures listed in the table, what nonfinancial measures might Duncan Materials Company monitor in its effort to achieve overall improvements in quality?
5. Are financial or nonfinancial quality measures likely of more use to: (a) managers? (b) operating personnel? Why?
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