Zaccaria Srl manufactures automotive parts. A major customer has just given Zaccaria an edict: ‘Improve quality or no more business.’ Lorenzo Da Ponte, the controller of Zaccaria, is given the task of developing a COQ programme. He seeks your advice on classifying each of items (a) to (g) as (i) a prevention cost, (ii) an appraisal cost, (iii) an internal failure cost, or (iv) an external failure cost. a Cost of inspecting products on the production line by Zaccaria quality inspectors. b Payment of travel costs for a Zaccaria customer representative to meet a customer who detected defective products. c Costs of reworking defective parts detected by Zaccaria’s quality-assurance group. d Labour cost of the product designer at Zaccaria whose task is to design components that will not break under extreme temperature variations. e Cost of automotive parts returned by customers. f Seminar costs for ‘Supplier Day’, a programme aimed at communicating to suppliers the new quality requirements for purchased components. g Costs of spoiled parts. 1 Classify the seven individual cost items into one of the four categories of prevention, appraisal, internal failure or external failure. 2 Give two examples of non-financial performance measures Zaccaria could monitor as part of a total-quality-control effort.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Zaccaria Srl manufactures automotive parts. A major customer has just given Zaccaria an edict: ‘Improve quality or no more business.’ Lorenzo Da Ponte, the controller of Zaccaria, is given the task of developing a COQ programme. He seeks your advice on classifying each of items (a) to (g) as (i) a prevention cost, (ii) an appraisal cost, (iii) an internal failure cost, or (iv) an external failure cost.
a Cost of inspecting products on the production line by Zaccaria quality inspectors.
b Payment of travel costs for a Zaccaria customer representative to meet a customer who detected defective products.
c Costs of reworking defective parts detected by Zaccaria’s quality-assurance group.
d Labour cost of the product designer at Zaccaria whose task is to design components that will not break under extreme temperature variations.
e Cost of automotive parts returned by customers.
f Seminar costs for ‘Supplier Day’, a programme aimed at communicating to suppliers the new quality requirements for purchased components.
g Costs of spoiled parts.
1 Classify the seven individual cost items into one of the four categories of prevention, appraisal, internal failure or external failure.
2 Give two examples of non-financial performance measures Zaccaria could monitor as part of a total-quality-control effort.
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