The supervisor at Golden Harvest Restaurant reviewed the daily food waste report. According to company policy, waste should not exceed 4% of daily food cost. With total food costs of $8,500, actual waste recorded was $425. Management requires the variance from acceptable waste limit to be calculated for performance review.

The supervisor at Golden Harvest Restaurant reviewed the daily food waste report. According to company policy, waste should not exceed 4% of daily food cost. With total food costs of $8,500, actual waste recorded was $425. Management requires the variance from acceptable waste limit to be calculated for performance review.

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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Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below. At the zero-defect state, Nabors expects to spend 375,000 on quality engineering, 75,000 on vendor certification, and 50,000 on packaging inspection. Assume sales to be 25,000,000. Required: 1. Prepare a long-range performance report for 20x5. What does this report tell the management of Nabors? 2. Explain why quality costs still are present for the zero-defect state. 3. What if Nabors achieves the zero-defect state reflected in the report? What are some of the implications of this achievement?
In 20X1, Don Blackburn, president of Price Electronics, received a report indicating that quality costs were 31% of sales. Faced with increasing pressures from imported goods. Don resolved to take measures to improve the overall quality of the companys products. After hiring a consultant in 20X1, the company began an aggressive program of total quality control. At the end of 20X5, Don requested an analysis of the progress the company had made in reducing and controlling quality costs. The accounting department assembled the following data: Required: 1. Compute the quality costs as a percentage of sales by category and in total for each year. 2. Prepare a multiple-year trend graph for quality costs, both by total costs and by category. Using the graph, assess the progress made in reducing and controlling quality costs. Does the graph provide evidence that quality has improved? Explain. 3. Using the 20X1 quality cost relationships (assume all costs are variable), calculate the quality costs that would have prevailed in 20X4. By how much did profits increase in 20X4 because of the quality improvement program? Repeat for 20X5.
The accounting system for Dolment Co. reflected the following quality costs for Year 1 and Year 2: Year 1 Year 2 Customer refunds for poor product quality $33,300 $29,000 Fitting machines for mistake-proof operations 8,460 11,800 Supply chain management activities 8,100 10,000 Waste disposal 39,600 36,000 Quality training 23,400 30,000 Litigation claims for product defects 72,900 64,000 b. Calculate the percentage change in each cost and for each category. (See attached)
For the year
Kathy Shorts, president of Oliver Company, was concerned with the trend in sales and profitability. The company had been losing customers at an alarming rate. Furthermore, the company was barely breaking even. Investigation revealed that poor quality was at the root of the problem. At the end of 20x5, Kathy decided to begin a quality improvement program. As a first step, she identified the following costs in the accounting records as quality related: Required: 1. Prepare a quality cost report by quality cost category. 2. Calculate the relative distribution percentages for each quality cost category. Comment on the distribution. 3. Using the Taguchi loss function, an average loss per unit is computed to be 15 per unit. What are the hidden costs of external failure? How does this affect the relative distribution? 4. Shortss quality manager decided not to bother with the hidden costs. What do you think was his reasoning? Any efforts to reduce measured external failure costs will also reduce the hidden costs. Do you agree or disagree? Explain.
A quality control activity analysis indicated the following four activity costs of a hotel: Inspecting cleanliness of rooms Processing lost customer reservations Reworking incorrectly prepared room service meals Employee training Total Sales are $4,700,000. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below. Open spreadsheet Prepare a cost of quality report. Round the percents of total quality cost to the nearest whole number and the percents of total sales to one decimal place. Cost of Quality Report Percent of Total Quality Cost Quality Cost Classification Prevention Appraisal Internal failure $155,100 310,200 232,650 77,550 $775,500 External failure Total Quality Cost % % % %6 % Percent of Total Sales % 36 % %
Mission Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below (CMA adapted) Multiple Choice Units produced Material moves per product line Direct labor-hours per product line Budgeted material handling costs: $594,000 Under a traditional costing system that allocates overhead on the basis of direct labor-hours, the materials handling costs allocated to one unit of Wall Mirrors would be O $1000 $1.350 $5,400 Wall Mirrors 210 5 1,050 $22.000 Specialty Nindows 25 46
Mission Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below (CMA adapted) Units produced Material moves per product line. Direct labor-hours per product line Budgeted material handling costs: $644,000 Wall Mirrors Specialty Windows 220 20 5 1,100 60 1,200 Under a traditional costing system that allocates overhead on the basis of direct labor-hours, the materials handling costs allocated to one unit of Specialty Windows would be Multiple Choice O $16.800 $54,900 $14,000 $22.700
Forensic Specialists compiled the following information for its first quarter cost of quality report: Sales $ 5,650,000 Cost of goods sold $ 3,390,000 Disposing of scrap $ 240,200 Quality training $ 89,000 Inspecting materials on delivery $ 285,000 Performance reviews $ 84,750 Resolving customer complaints $ 36,920 Certifying suppliers $ 150,000 The relevant percentage to be used to express appraisal activities at Forensic Specialists is: Multiple Choice 2.95%. 1.50%. 6.48%. 36.60%.
Listed below are selected items from the cost-of-quality (COQ) report for Watson Products for last month: Category Amount Rework $ 770 Equipment maintenance 1,289 Product testing 921 Field-service costs 650 Spoilage 558 Product liability insurance 870 Product repair 740 What is Watson’s total prevention and appraisal cost for the month?
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