Costs-of-quality analysis. Safe Travel produces car seats for children from newborn to 2 years old. Safe Travel’s only problem with its car seats was stitching in the straps. The problem can usually be detected and repaired during an internal inspection. Inspection costs $5.00 per car seat, and repairs cost $1.00 per car seat. All 200,000 car seats were inspected last year, and 5% were found to have problems with the stitching. Another 1% of the 200,000 car seats had problems with the stitching, but the internal Inspection did not discover them. Defective units that were sold and shipped to customers are shipped back to Safe Travel and repaired. Shipping costs are $8.00 per car seat, and repair costs are $1.00 per car seat. Negative publicity will result in a loss of future contribution margin of $100 for each external failure.
- 1. Identify total costs of quality by category (appraisal, internal failure, and external failure).
- 2. Safe Travel is concerned with the high up-front cost of Inspecting all 200,000 units. It Is considering an alternative internal Inspection plan that will cost only $3.00 per car seat inspected. During the internal inspection, the alternative technique will detect only 3.5% of the 200,0 car seats that have stitching problems. The other 2.5% will be detected after the car seats are sold and shipped. What are the total costs of quality for the alternative technique?
- 3. What factors other than cost should Safe Travel consider before changing inspection techniques?
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EBK HORNGREN'S COST ACCOUNTING
- Safe Travel produces car seats for children from newborn to 2 years old. The company is worried because one of its competitors has recently come under public scrutiny because of product failure. Historically, Safe Travel's only problem with its car seats was stitching in the straps. The problem can usually be detected and repaired during an internal inspection. The cost of the inspection is $5.00 per car seat, and the repair cost is $1.00 per car seat. All 200,000 car seats were inspected last year, and 5% were found to have problems with the stitching in the straps during the internal inspection. Another 1% of the 200,000 car seats had problems with the stitching, but the internal inspection did not discover them. Defective units that were sold and shipped to customers needed to be shipped back to Safe Travel and repaired. Shipping costs are $8.00 per car seat, and repair costs are $1.00 per car seat. However, the out-of-pocket costs (shipping and repair) are not the only costs of…arrow_forwardSupreme Furniture needs to purchase glass panes to make glass top coffee tables. Last year Supreme Furniture has two suppliers, Bobux and Twinkle, with the following supplier related information: Cost per unit of Number of activities Number of activities activity driver for Bobux Supplier related activities Returning poor quality glass panes $120 per pane 25 panes Processing purchase orders Receiving and inspecting deliveries S50 per delivery 15 deliveries Supplier audit Rework due to poor quality glass $100 per table 60 tables Purchase price per glass pane for Twinkle 12 panes 40 orders 15 deliveries 2 audits 15 tables $150 780 $20 per order 12 orders $1000 per audit 5 audits $100 Number of glass panes purchased 446 Calculate the supplier performance index of Bobux (round your answer to 2 decimal places). Answer.arrow_forwardNeed help with this practice problemarrow_forward
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- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning