Florex has made an effort to improve the quality of its products. This year, the company added a statistical process control element to its quality assurance program. A summary of costs related to quality for last year and this is given below. Required: Prepare a cost of quality summary(including percentages), organized into the four main cost of quality categories, and comment on the patterns that you see from year to year. Is Florex's quality improving in promising ways with its new efforts?
Florex has made an effort to improve the quality of its products. This year, the company added a statistical process control element to its quality assurance program. A summary of costs related to quality for last year and this is given below. Required: Prepare a cost of quality summary(including percentages), organized into the four main cost of quality categories, and comment on the patterns that you see from year to year. Is Florex's quality improving in promising ways with its new efforts?
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Florex has made an effort to improve the quality of its products.
company added a statistical process control element to its quality assurance
This
the
orek has made an effort to improve the quality of its products.
year,
company
program. A summary of costs related to cuality for last vear and this is given below.
Required: Prepare a cost of quality summarylincluding percentages), organized into the four
main cost of quality categories, and comment on the patterns that you see from year to
year. Is Florex's quality improving in promising ways with its new efforts?
Last Year (in thousands of
This Year (in thousands of
$4)
$)
Inspection
Quality Engineering
960
1140
420
570
Rework Labor
1,050
1,500
Statistical Process Control
50
180
Warranty work
Testing Supplies Used
Systems Design
Cost of Scrap
4,800
1,950
30
60
480
750
630
1125
Product recalls
2,770
1,725
1,200
Product Testing
810
Totals
12,000
10,200
Revenues for both years were $65,000,000
Expert Solution
Step 1
Answer:
| Last year (000 in $) | This year (000 in $) | |
| Prevention Cost | ||
| Testing Supplies Used | 30 | 60 |
| System Design | 480 | 750 |
| Product Testing | 810 | 1200 |
| Total | 1320 | 2010 |
| Appraisal Cost | ||
| Inspection | 960 | 1140 |
| Quality Engineering | 420 | 570 |
| Statistical Process Control | 50 | 180 |
| Total | 1430 | 1890 |
| Internal failure | ||
| Rework failure | 1050 | 1500 |
| Cost of scrap | 630 | 1125 |
| Product recalls | 2770 | 1725 |
| Total | 4450 | 4350 |
| External Failure | ||
| Warranty Cost | 4800 | 1950 |
| Total | 4800 | 1950 |
| Grant Total cost of quality | 12000 | 10200 |
| Decrease in cost of quality | 1800 |
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