Financial & Managerial Accounting
Financial & Managerial Accounting
14th Edition
ISBN: 9781337119207
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 26, Problem 26.4BPR

Pareto chart and cost of quality report for a manufacturing company

The president of Mission Inc. has been concerned about the growth in costs over the last several years. The president asked the controller to perform an activity analysis to gain a better insight into these costs. The activity analysis revealed the following:

Activities Activity Cost
Correcting invoke errors $ 7,500
Disposing of incoming materials with poor quality 15,000
Disposing of scrap 27,500
Expediting late production 22,500
Final inspection 20,000
Inspecting incoming materials 5,000
Inspecting work in process 25,000
Preventive machine maintenance 15,000
Producing product 97,500
Responding to customer quality complaints 15,000
Total $250,000

The production process is complicated by quality problems, requiring the production manager to expedite production and dispose of scrap.

Instructions

  1. 1. Prepare a Pareto chart of the company activities.
  2. 2. Classify the activities into prevention, appraisal, internal failure, external failure, and not costs of quality (producing product). Classify the activities into value-added and non-value- added activities.
  3. 3. Use the activity cost information to determine the percentages of total costs that are prevention, appraisal, internal failure, external failure, and not costs of quality.
  4. 4. Determine the percentages of total costs that are value-added and non-value-added.
  5. 5. Interpret the information.
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Pareto Chart and Cost of Quality Report for a Manufacturing Company The president of Mission Inc. has been concerned about the growth in costs over the last several years. The president asked the controller to perform an activity analysis to gain a better insight into these costs. The result of the activity analysis is summarized as follows: Activities Activity Cost Correcting invoice errors $11,250 Disposing of incoming materials with poor quality 9,000 Disposing of scrap 31,500 Expediting late production 27,000 Final inspection 22,500 Inspecting incoming materials 4,500 Inspecting work in process 22,500 Preventive machine maintenance 15,750 Producing product 67,500 Responding to customer quality complaints 13,500 Total $225,000 The production process is complicated by quality problems, requiring the production manager to expedite production and dispose of scrap. Required: 1.  On paper or in a spreadsheet program, prepare a Pareto chart for each of the…
Pareto Chart and Cost of Quality Report for a Manufacturing Company The president of Mission Inc. has been concerned about the growth in costs over the last several years. The president asked the controller to perform an activity analysis to gain a better insight into these costs. The activity analysis revealed the following. The production process is complicated by quality problems, requiring the production manager to expedite production and dispose of scrap. Required: 1.  Classify the activities into prevention, appraisal, internal failure, external failure, and not costs of quality (producing product). Classify the activities into value-added and non-value added activities. Activity Activity Cost   Cost of Quality Classification VA/NVA Correcting invoice errors $7,500       Disposing of incoming materials with poor quality 15,000     Disposing of scrap 27,500     Expediting late production 22,500     Final inspection 20,000     Inspecting incoming…
Cost Classification and Behaviour—Spark Electrical Company Spark Electrical Company manufactures electrical components. Plant management has experienced difficulties with fluctuating monthly overhead costs. Management wants to be able to estimate overhead costs to plan its operations and financial needs. A trade association publication reports that for companies manufacturing electrical components, overhead tends to vary with machine hours. Monthly data was gathered on machine hours and overhead costs for the past two years. There were no major changes in operations over this period of time. The raw data is: Month Number Machine Hours Overhead Costs ($)   1 20,000 84,000   2 25,000 99,000   3 22,000 89,500   4 23,000 90,000   5 20,000 81,500   6 19,000 75,500   7 14,000 70,500   8 10,000 64,500   9 12,000 69,000 10 17,000 75,000 11 16,000 71,500 12 19,000 78,000 13 21,000 86,000 14 24,000 93,000 15 23,000 93,000 16 22,000 87,000 17 20,000 80,000…

Chapter 26 Solutions

Financial & Managerial Accounting

Ch. 26 - Prob. 11DQCh. 26 - Prob. 12DQCh. 26 - Prob. 13DQCh. 26 - Lead time Rough Riders Inc. manufactures jeans in...Ch. 26 - Lean features Which of the following are features...Ch. 26 - Lean accounting The annual budgeted conversion...Ch. 26 - Cost of quality report A quality control activity...Ch. 26 - Process activity analysis Roen Company incurred an...Ch. 26 - Prob. 26.1EXCh. 26 - Prob. 26.2EXCh. 26 - Lean principles Active Apparel Company...Ch. 26 - Lead time analysis Palm Pals Inc. manufactures toy...Ch. 26 - Reduce setup time Hammond Inc. has analyzed the...Ch. 26 - Calculate lead time Flint Fabricators Int....Ch. 26 - Calculate lead time Williams Optical Inc. is...Ch. 26 - Prob. 26.8EXCh. 26 - Prob. 26.9EXCh. 26 - Lean principles for a restaurant The management of...Ch. 26 - Prob. 26.11EXCh. 26 - Lean accounting Westgate Inc. uses a lean...Ch. 26 - Lean accounting Modern Lighting Inc. manufactures...Ch. 26 - Lean accounting Vintage Audio Inc. manufactures...Ch. 26 - Pareto chart Meagher Solutions Inc. manufacture....Ch. 26 - Prob. 26.16EXCh. 26 - Pareto chart for a service company Three Rivers...Ch. 26 - Cost of quality and value-added/non-value-added...Ch. 26 - Process activity analysis The Brite Beverage...Ch. 26 - Process activity analysis for a service company...Ch. 26 - Prob. 26.21EXCh. 26 - Prob. 26.1APRCh. 26 - Lead time Sound Tek Inc. manufactures electronic...Ch. 26 - Lean accounting Dashboard Inc. manufactures and...Ch. 26 - Pareto chart and cost of quality report for a...Ch. 26 - Prob. 26.1BPRCh. 26 - Lead time Master Chef Appliance Company...Ch. 26 - Lean accounting Com-Tel Inc. manufactures and...Ch. 26 - Pareto chart and cost of quality report for a...Ch. 26 - Prob. 1ADMCh. 26 - Turn around time in an operating room of a...Ch. 26 - Prob. 3ADMCh. 26 - Ethics in Action In August, Lannister Company...Ch. 26 - Prob. 26.3TIF
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