In response to intensive foreign competition, the management of Florex Company has attempted over the past year to improve the quality of its products. A statistical process control system has been installed and other steps have been taken to decrease the amount of warranty and other field costs, which have been trending upward over the past several years. Costs relating to quality and quality control over the last two years are given below: Costs (in thousands) Last This Year Year $ 1,584 Inspection Quality engineering Depreciation of test equi pment Rework labor 765 540 675 630 225 $ 1,260 $ 1,620 Statistical process control Cost of field servicing Supplies used in testing Systems development Warranty repairs Net cost of scrap Product testing 225 $ 1,710 $ 1,170 81 45 630 900 $ 4,140 $ 1,260 $ 1,530 $ 1,440 540 900 $ 2,700 900 Product recalls 990 Disposal of defective products 900 Sales have been flat over the past few years, at $90,000,000 per year. A great deal of money has been spent in the effort to upgrade quality, and management is anxious to see whether or not the effort has been effective. Required: 1. Prepare a quality cost report that contains data for both this year and last year. (Enter amount values in thousands. Round your percentage answers to 2 decimal places (i.e 0.1234 should be entered as 12.34).)
In response to intensive foreign competition, the management of Florex Company has attempted over the past year to improve the quality of its products. A statistical process control system has been installed and other steps have been taken to decrease the amount of warranty and other field costs, which have been trending upward over the past several years. Costs relating to quality and quality control over the last two years are given below: Costs (in thousands) Last This Year Year $ 1,584 Inspection Quality engineering Depreciation of test equi pment Rework labor 765 540 675 630 225 $ 1,260 $ 1,620 Statistical process control Cost of field servicing Supplies used in testing Systems development Warranty repairs Net cost of scrap Product testing 225 $ 1,710 $ 1,170 81 45 630 900 $ 4,140 $ 1,260 $ 1,530 $ 1,440 540 900 $ 2,700 900 Product recalls 990 Disposal of defective products 900 Sales have been flat over the past few years, at $90,000,000 per year. A great deal of money has been spent in the effort to upgrade quality, and management is anxious to see whether or not the effort has been effective. Required: 1. Prepare a quality cost report that contains data for both this year and last year. (Enter amount values in thousands. Round your percentage answers to 2 decimal places (i.e 0.1234 should be entered as 12.34).)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:In response to intensive foreign competition, Florex Company management has taken steps to improve product quality over the past year. They installed a statistical process control system to reduce warranty and other field costs, which had been increasing. Here's a breakdown of the costs related to quality and quality control over the last two years, given in thousands:
- **Costs (in thousands)**
- **Inspection:** Last Year $765, This Year $1,584
- **Quality engineering:** Last Year $540, This Year $675
- **Depreciation of test equipment:** Last Year $630, This Year $225
- **Rework labor:** Last Year $1,260, This Year $1,620
- **Statistical process control:** Last Year $0, This Year $225
- **Cost of field servicing:** Last Year $1,710, This Year $1,710
- **Supplies used in testing:** Last Year $45, This Year $81
- **Systems development:** Last Year $630, This Year $900
- **Warranty repairs:** Last Year $4,140, This Year $1,260
- **Net cost of scrap:** Last Year $540, This Year $1,530
- **Product testing:** Last Year $900, This Year $1,440
- **Product recalls:** Last Year $2,700, This Year $990
- **Disposal of defective products:** Both Years $900
Sales were consistent over the past five years at $90,000,000 annually. Significant investment has been made to enhance quality, and management is evaluating its effectiveness.
### Required Task:
Prepare a quality cost report for both years. Enter the cost values in thousands and round percentage answers to 2 decimal places.
### Florex Company Quality Cost Report
#### Prevention Costs
- **Quality Engineering:**
- Last Year: $540,000 (0.60%)
- This Year: $675,000 (0.75%)
- **Statistical Process Control:**
- Last Year: $0 (0.00%)
- This Year: $225,000 (0.25%)
- **Systems Development:**
- Last Year: $630,000 (0.70%)
- This Year: $900,000 (1.00%)
- **Total Prevention Costs:**
- Last
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