Charles Berkle is the manager of Nogain Manufacturing and is interested in doing a cost of quality analysis. The following cost and revenue data are available for the most recent year ended December 31: Sales revenue Cost of goods sold Warranty expense Inspection costs Scrap and rework Product returns due to defects Depreciation expense Machine maintenance expense Wage expense Machine breakdown costs Estimated lost sales due to poor quality $ 250,000 140,000 22,000 13,000 7,600 6,000 10,000 2,800 35,000 4,000 5,000 Required: a. Classify each of these costs into the four quality cost categories and prepare a cost of quality report for Nogain. b. What percentage of sales revenue is being spent on prevention and appraisal activities? c. What percentage of sales revenue is being spent on internal and external failure costs?

Charles Berkle is the manager of Nogain Manufacturing and is interested in doing a cost of quality analysis. The following cost and revenue data are available for the most recent year ended December 31: Sales revenue Cost of goods sold Warranty expense Inspection costs Scrap and rework Product returns due to defects Depreciation expense Machine maintenance expense Wage expense Machine breakdown costs Estimated lost sales due to poor quality $ 250,000 140,000 22,000 13,000 7,600 6,000 10,000 2,800 35,000 4,000 5,000 Required: a. Classify each of these costs into the four quality cost categories and prepare a cost of quality report for Nogain. b. What percentage of sales revenue is being spent on prevention and appraisal activities? c. What percentage of sales revenue is being spent on internal and external failure costs?

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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Charles Berkle is the manager of Nogain Manufacturing and is interested in doing a cost of quality analysis. The following cost and revenue data are available for the most recent year ended December 31: Sales revenue Cost of goods sold Warranty expense Inspection costs Scrap and rework Product returns due to defects Depreciation expense Machine maintenance expense Wage expense Machine breakdown costs Estimated lost sales due to poor quality $ 250,000 140,000 22,000 14,000 7,800 6,000 10,000 3,400 35,000 4,000 5,000 Required: a. Classify each of these costs into the four quality cost categories and prepare a cost of quality report for Nogain. b. What percentage of sales revenue is being spent on prevention and appraisal activities? c. What percentage of sales revenue is being spent on internal and external failure costs?
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