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Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Costs of Quality
Nuke-It-Now manufactures microwave ovens. The following represents the financial information from one of its manufacturing plants for two years.
| Year 1 | Year 2 |
Sales | $3,500,000 | $3,800,000 |
Costs |
|
|
Redesign process | $ 29,000 | $ 37,000 |
Discard defective units | 37,000 | 43,000 |
Training on equipment& | 250,000 | 210,000 |
Warranty claims | 129,000 | 176,000 |
Contract cancellations& | 201,000 | 154,000 |
Rework | 72,000 | 96,000 |
Preventive maintenance | 114,000 | 152,000 |
Product liability claims& | 302,000 | 176,000 |
Final inspection | 190,000 | 198,000 |
Required
a.Classify these items into prevention (P), appraisal (A), internal failure (IF), or external failure (EF) costs.
b.Calculate the ratio of the prevention, appraisal, internal failure, and external failure costs to sales for year 1 and year 2.
Verified
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Financial information for two years of operation at a microwave oven manufacturing plant is given in 10-44E.
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