Long-Term Performance Report Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below. Prevention costs:      Prototype inspection $ 380,000    Vendor certification 760,000      Total prevention costs $ 1,140,000 Appraisal costs:      Process acceptance $ 395,000    Test labor 440,000      Total Appraisal costs $ 835,000 Internal failure costs:      Retesting $ 227,500    Rework 455,000      Total internal failure costs $ 682,500 External failure costs:      Recalls $ 293,750    Product liability 536,250      Total external failure costs $ 830,000 Total quality costs $3,487,500 At the zero-defect state, Nabors expects to spend $475,000 on prototype inspection, $95,000 on vendor certification, and $60,000 on process acceptance. Assume sales to be $3,000,000. Required: Question Content Area 1. Prepare a long-range performance report for 20x5. Enter all answers as positive amounts. If the budget variance amount is unfavorable select "Unfavorable" in the last column of the table. Select "Favorable" if it is favorable. Round percentage answers to two decimal places, if rounding is required. For example, 5.789% would be entered as "5.79". Enter "0" as the target cost amount if there would be no cost at the zero-defect state. Nabors CompanyLong-Range Performance ReportFor the Year Ended June 30, 20x5 blank Actual Costs Target Costs Budget Variance Favorable; or Unfavorable Prevention costs: blank blank blank blank   $- Select - $- Select - $- Select -     - Select - - Select - - Select -   Total prevention costs $- Select - $- Select - $- Select -   Appraisal costs: blank blank blank blank   $- Select - $- Select - $- Select -     - Select - - Select - - Select -   Total appraisal costs $- Select - $- Select - $- Select -   Internal failure costs: blank blank blank blank   $- Select - - Select - $- Select -     - Select - - Select - - Select -   Total internal failure costs $- Select - - Select - $- Select -   External failure costs: blank blank blank blank   $- Select - - Select - $- Select -     - Select - - Select - - Select -   Total external failure costs $- Select - - Select - $- Select -   Total quality costs $- Select - $- Select - $- Select -   Percentage of sales - Select -% - Select -% - Select -%     Question Content Area 2. Why are quality costs still present for the zero-defect state?

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter14: Quality And Environmental Cost Management
Section: Chapter Questions
Problem 4CE: Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below. At the...
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Long-Term Performance Report

Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below.

Prevention costs:  
   Prototype inspection $ 380,000
   Vendor certification 760,000
     Total prevention costs $ 1,140,000
Appraisal costs:  
   Process acceptance $ 395,000
   Test labor 440,000
     Total Appraisal costs $ 835,000
Internal failure costs:  
   Retesting $ 227,500
   Rework 455,000
     Total internal failure costs $ 682,500
External failure costs:  
   Recalls $ 293,750
   Product liability 536,250
     Total external failure costs $ 830,000
Total quality costs $3,487,500

At the zero-defect state, Nabors expects to spend $475,000 on prototype inspection, $95,000 on vendor certification, and $60,000 on process acceptance. Assume sales to be $3,000,000.

Required:

Question Content Area

1. Prepare a long-range performance report for 20x5. Enter all answers as positive amounts. If the budget variance amount is unfavorable select "Unfavorable" in the last column of the table. Select "Favorable" if it is favorable. Round percentage answers to two decimal places, if rounding is required. For example, 5.789% would be entered as "5.79". Enter "0" as the target cost amount if there would be no cost at the zero-defect state.

Nabors CompanyLong-Range Performance ReportFor the Year Ended June 30, 20x5
blank Actual Costs Target Costs Budget Variance Favorable; or Unfavorable
Prevention costs: blank blank blank blank
 
$- Select - $- Select - $- Select -
 
 
- Select - - Select - - Select -
 
Total prevention costs $- Select - $- Select - $- Select -
 
Appraisal costs: blank blank blank blank
 
$- Select - $- Select - $- Select -
 
 
- Select - - Select - - Select -
 
Total appraisal costs $- Select - $- Select - $- Select -
 
Internal failure costs: blank blank blank blank
 
$- Select - - Select - $- Select -
 
 
- Select - - Select - - Select -
 
Total internal failure costs $- Select - - Select - $- Select -
 
External failure costs: blank blank blank blank
 
$- Select - - Select - $- Select -
 
 
- Select - - Select - - Select -
 
Total external failure costs $- Select - - Select - $- Select -
 
Total quality costs $- Select - $- Select - $- Select -
 
Percentage of sales - Select -% - Select -% - Select -%
 
 

Question Content Area

2. Why are quality costs still present for the zero-defect state?

 

 

 

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