Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 26

COQ Histogram Genova Company classifies its costs of quality into four categories. The costs of quality (COQ) as a percentage of cost of goods sold for the last three years are as follows:

	2010	2011	2012
Prevention costs	1.00%	4.00%	2.00%
Appraisal costs	3.00	2.50	1.50
Internal failure costs	27.00	23.00	14.00
External failure costs	31.00	18.00	12.00

Required

1. Use a spreadsheet to prepare a histogram that shows the costs of quality (COQ) trends as a percentage of costs of goods sold.

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2. Comment on the trends in cost of quality (COQ) over the three-year period from 2010 to 2012.

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3. What cost of quality can the company expect as a percentage of its cost of goods sold in 2013? Explain.

Step 1 of 4

Cost of Quality i.e. COQ is a complete framework which includes the financial costs associated with quality. The major classifications of COQ categories are prevention cost, appraisal cost, internal failure cost and external failure costs.