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QUESTION 4 Dustin and Steve Ltd wanted to start a quality improvement program. The following table presents financial information pertaining to quality in 2019 and 2020 in RM000. 2019 2020 RM000 RM000 Sales 100,000 100,000 Handling Customer complaints Audit of end product (Quality audits) Statistical Process control 500 400 800 700 300 250 Field testing and appraisal at customer site Rework Costs 400 400 1000 800 Product liability claims Test and Inspection of incoming material Breakdown maintenance Loss of sales arising from reputation of poor quality Product-testing labour Quality Training Scrap Quality Engineering Cost of returned goods Re-entering data because of keying Warranty repair Supplier reviews Downtime due to quality problems Systems Development Debugging of software error Cost of field servicing and handling complaints Line inspection Inspection on WIP and completed units Technical Support for Suppliers Product- testing equipment Retesting Supervision for prevention 400 300 500 300 400 900 1000 800 750 220 1000 800 800 500 400 300 3000 2000 200 150 800 700 300 200 600 500 200 150 400 300 500 350 850 700 1000 800 150 150 300 200 400 300 220 200 Product Recalls 1000 800 Supervision of testing and inspecting activities Preventive equipment maintenance Re-inspection of reworked products 500 600 500 400 500 450 Required: Prepare a quality cost report and calculate the ratio of each of the FOUR (4) categories of cost of quality for 2019 and 2020. a. b. Critically evaluate the importance of quality cost reporting.

QUESTION 4 Dustin and Steve Ltd wanted to start a quality improvement program. The following table presents financial information pertaining to quality in 2019 and 2020 in RM000. 2019 2020 RM000 RM000 Sales 100,000 100,000 Handling Customer complaints Audit of end product (Quality audits) Statistical Process control 500 400 800 700 300 250 Field testing and appraisal at customer site Rework Costs 400 400 1000 800 Product liability claims Test and Inspection of incoming material Breakdown maintenance Loss of sales arising from reputation of poor quality Product-testing labour Quality Training Scrap Quality Engineering Cost of returned goods Re-entering data because of keying Warranty repair Supplier reviews Downtime due to quality problems Systems Development Debugging of software error Cost of field servicing and handling complaints Line inspection Inspection on WIP and completed units Technical Support for Suppliers Product- testing equipment Retesting Supervision for prevention 400 300 500 300 400 900 1000 800 750 220 1000 800 800 500 400 300 3000 2000 200 150 800 700 300 200 600 500 200 150 400 300 500 350 850 700 1000 800 150 150 300 200 400 300 220 200 Product Recalls 1000 800 Supervision of testing and inspecting activities Preventive equipment maintenance Re-inspection of reworked products 500 600 500 400 500 450 Required: Prepare a quality cost report and calculate the ratio of each of the FOUR (4) categories of cost of quality for 2019 and 2020. a. b. Critically evaluate the importance of quality cost reporting.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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QUESTION 4 Dustin and Steve Ltd wanted to start a quality improvement program. The following table presents financial information pertaining to quality in 2019 and 2020 in RM000. 2019 2020 RM000 RM000 Sales 100,000 100,000 Handling Customer complaints Audit of end product (Quality audits) Statistical Process control 500 400 800 700 300 250 Field testing and appraisal at customer site Rework Costs 400 400 1000 800 Product liability claims Test and Inspection of incoming material Breakdown maintenance Loss of sales arising from reputation of poor quality Product-testing labour Quality Training Scrap Quality Engineering Cost of returned goods Re-entering data because of keying Warranty repair Supplier reviews Downtime due to quality problems Systems Development Debugging of software error Cost of field servicing and handling complaints Line inspection Inspection on WIP and completed units Technical Support for Suppliers Product- testing equipment Retesting Supervision for prevention 400 300 500 300 400 900 1000 800 750 220 1000 800 800 500 400 300 3000 2000 200 150 800 700 300 200 600 500 200 150 400 300 500 350 850 700 1000 800 150 150 300 200 400 300 220 200 Product Recalls 1000 800 Supervision of testing and inspecting activities Preventive equipment maintenance Re-inspection of reworked products 500 600 500 400 500 450 Required: Prepare a quality cost report and calculate the ratio of each of the FOUR (4) categories of cost of quality for 2019 and 2020. a. b. Critically evaluate the importance of quality cost reporting.
Transcribed Image Text:QUESTION 4 Dustin and Steve Ltd wanted to start a quality improvement program. The following table presents financial information pertaining to quality in 2019 and 2020 in RM000. 2019 2020 RM000 RM000 Sales 100,000 100,000 Handling Customer complaints Audit of end product (Quality audits) Statistical Process control 500 400 800 700 300 250 Field testing and appraisal at customer site Rework Costs 400 400 1000 800 Product liability claims Test and Inspection of incoming material Breakdown maintenance Loss of sales arising from reputation of poor quality Product-testing labour Quality Training Scrap Quality Engineering Cost of returned goods Re-entering data because of keying Warranty repair Supplier reviews Downtime due to quality problems Systems Development Debugging of software error Cost of field servicing and handling complaints Line inspection Inspection on WIP and completed units Technical Support for Suppliers Product- testing equipment Retesting Supervision for prevention 400 300 500 300 400 900 1000 800 750 220 1000 800 800 500 400 300 3000 2000 200 150 800 700 300 200 600 500 200 150 400 300 500 350 850 700 1000 800 150 150 300 200 400 300 220 200 Product Recalls 1000 800 Supervision of testing and inspecting activities Preventive equipment maintenance Re-inspection of reworked products 500 600 500 400 500 450 Required: Prepare a quality cost report and calculate the ratio of each of the FOUR (4) categories of cost of quality for 2019 and 2020. a. b. Critically evaluate the importance of quality cost reporting.
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Step 1

Cost of Production Report -

When the condensed information about the movement of costs and units is needed in a costing system, the cost of production report is created. It also goes by the name CPR and resembles the job cost sheet created by a job order cost accounting system.

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