2018 2019 Quality Costs (000s) Prevention $3.2 10.7 28.3 42.6 50.0 Appraisal 26.3 29.2 30.6 24.1 19.6 Internal failure 39.1 51.3 48.4 35.9 32.1 External failure 118.6 110.5 105.2 91.3 65.2 Accounting Measures (000s) Sales $2,700.6 2,690.1 2,705.3 2,310.2 2,8
2.1. Backwoods American, Inc., produces expensive water-repellent, down-filled parkas. The company implemented a total quality-management program in 2014. Following are quality-related accounting data that have been accumulated for the five-year period after the program’s start.
Year
2015 2016 2017 2018 2019
Quality Costs (000s)
Prevention $3.2 10.7 28.3 42.6 50.0
Appraisal 26.3 29.2 30.6 24.1 19.6
Internal failure 39.1 51.3 48.4 35.9 32.1
External failure 118.6 110.5 105.2 91.3 65.2
Accounting Measures (000s)
Sales $2,700.6 2,690.1 2,705.3 2,310.2 2,880.7
Manufacturing
cost 420.9 423.4 424.7 436.1 435.5
a. Compute the company’s total failure costs as a percentage of total quality costs for each of the five years. Does there appear to be a trend to this result? If so, speculate on what might have caused the trend.
b. Compute prevention costs and appraisal costs, each as a percentage of total costs, during each of the five years. Speculate on what the company’s quality strategy appears to be.
c. Compute quality-sales indices and quality-cost indices for each of the five years. Is it possible to assess the effectiveness of the company’s quality-management program from these index values?
d. List several examples of each quality-related cost—that is, prevention, appraisal, and internal and external failure—that might result from the production of parkas.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
