Requirement 1. Calculate the predicted quality cost savings from the design engineering work.
Requirement 1. Calculate the predicted quality cost savings from the design engineering work.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Requirement 1. Calculate the predicted quality cost savings from the design engineering work.
Predicted
Reduction in
Activity Costs
Activity
Inspection of incoming materials..
Inspection of finished goods..
Number of defective units discovered in-house....
Number of defective units discovered by customers
Lost sales to dissatisfied customers......
Total predicted quality cost savings
Requirement 2. The company spent $50,000 on design engineering for the new toy robot. What is the net benefit of this "preventive" quality activity?
Less:
Net benefit of design engineering
Requirement 3. What major difficulty would management have had in implementing this costs-of-quality approach?
What alternative approach could it use to measure quality improvement?
I

Transcribed Image Text:Robotic Construction Toys Corp. is using a costs-of-quality approach to evaluate design engineering efforts for a new toy robot. The company's senior
managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activities over
the two-year life of the toy robot follow. Also shown are the cost allocation rates for the activities.
(Click on the icon to view the information.)
Data table
Activity
Inspection of incoming materials
Inspection of finished goods....
Number of defective units discovered in-house.
Number of defective units discovered by customers..
Lost sales to dissatisfied customers
Requirements
......
****
Predicted
Reduction in
Activity Units
3. What major difficulty would management have had in implementing
this costs-of-quality approach? What alternative approach could it use to
measure quality improvement?
300 $
300 $
3,200 $
900 $
320 $
-
1. Calculate the predicted quality cost savings from the design engineering work.
2. The company spent $50,000 on design engineering for the new toy robot.
What is the net benefit of this "preventive" quality activity?
Activity Cost
Allocation Rate
per Unit
21
36
10
42
57
I
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