Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 42

Operational Performance Measures

Mid-States Metal Finishers produces steel tubing at its Akron plant. The plant’s quality assurance officer prepares a monthly report and sends it to headquarters. The data compiled in these reports for a recent six-month period follow:

MID-STATES METAL FINISHERS Production Efficiency Report
	Month
	Jan	Feb	Mar	Apr	May	Jun
Percentage of orders filled on time	87	86	88	92	91	92
Number of defective units, as a percent of total	7	6	2	1	3	2
Number of customer returns	20	21	18	10	6	5

Required

a. Write a memo to the company president evaluating the plant’s performance.

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b. If you identify any areas of concern in your memo, indicate an appropriate action for management to take. Indicate any additional information you would like to have to make your evaluation.

Step 1 of 2

a.

The memo to the company president evaluating the plant’s performance should be written as follows:

To: President, MS Metals

From: ABC

Date: 09/07/2015

After evaluating the production efficiency report it has been observed that the percentage of orders filled on time have increased during the period of six months which shows an increase in the efficiency of the employees.

The number of defective units has decreased drastically over the period of six months shows that the company’s production and inspection quality has increased.

The number of customer returns has also decreased a lot over the period of six months. This indicates that the quality of the product has increased.