Exercise 4 (Cost of Quality Analysis, Nonfinancial Quality Measures)The Gabriel Corporation manufactures and sells industrial grinders. Thefollowing table presents financial information pertaining to quality in 20X3and 20X4 (in thousands):20X3P10,0001102501006020X4P12,50085RevenuesLine inspectionScrapDesign engineeringCost of returned goodsProduct-testing equipmentCustomer support20024014550405030135901004040Rework costs16035Preventive equipment maintenanceProduct liability claimsIncoming materials inspectionBreakdown maintenance20020Product-testing laborTrainingWarranty repairSupplier evaluation9022045300751202005020Required:1. Classify the cost items in the table into prevention, appraisal, internalfailure, or external failure categories.2. Calculate the ratio of each COQ category to revenues in 20X3 and 20X4.Comment on the trends in costs of quality between 20X3 and 20X4.3. Give two examples of nonfinancial quality measures that GabrielCorporation could monitor as part of a total quality-control effort.

Cost function is a function that is used to show how production expense will change at different…

Required: 1. Classify the cost items in the table into prevention, appraisal, internal failure, or external failure categories. 2. Calculate the ratio of each COQ category to revenues in 20X3 and 20X4. Comment on the trends in costs of quality between 20X3 and 20X4. 3. Give two examples of nonfinancial quality measures that Gabriel Corporation could monitor as part of a total quality-control effort.

Required: 1. Classify the cost items in the table into prevention, appraisal, internal failure, or external failure categories. 2. Calculate the ratio of each COQ category to revenues in 20X3 and 20X4. Comment on the trends in costs of quality between 20X3 and 20X4. 3. Give two examples of nonfinancial quality measures that Gabriel Corporation could monitor as part of a total quality-control effort.

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Chapter1: Financial Statements And Business Decisions

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Question

Exercise 4 (Cost of Quality Analysis, Nonfinancial Quality Measures)
The Gabriel Corporation manufactures and sells industrial grinders. The
following table presents financial information pertaining to quality in 20X3
and 20X4 (in thousands):
20X3
P10,000
110
250
100
60
20X4
P12,500
85
Revenues
Line inspection
Scrap
Design engineering
Cost of returned goods
Product-testing equipment
Customer support
200
240
145
50
40
50
30
135
90
100
40
40
Rework costs
160
35
Preventive equipment maintenance
Product liability claims
Incoming materials inspection
Breakdown maintenance
200
20
Product-testing labor
Training
Warranty repair
Supplier evaluation
90
220
45
300
75
120
200
50
20
Required:
1. Classify the cost items in the table into prevention, appraisal, internal
failure, or external failure categories.
2. Calculate the ratio of each COQ category to revenues in 20X3 and 20X4.
Comment on the trends in costs of quality between 20X3 and 20X4.
3. Give two examples of nonfinancial quality measures that Gabriel
Corporation could monitor as part of a total quality-control effort.

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