Financial & Managerial Accounting
14th Edition
ISBN: 9781337119207
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
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. Prepare a Pareto chart of the company activities.
- 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. 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. Determine the percentages of total costs that are value-added and non-value-added.
- 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…
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 invoice errors
$8,500
Disposing of income materials with poor quality
16,000
Disposing of scrap
28,500
Expediting late production
21,500
Final inspection
19,000
Inspecting incoming materials
5,000
Inspecting work in process
25,000
Preventive machine maintenance
15,000
Producing product
95,500
Responding to customer quality complaints
15,000
Total
249,000
The production process is complicated by quality problems, requiring the production manager to expedite production and dispose of scrap.
Prepare a Pareto chart of the company activities.
Classify the activities into prevention, appraisal, internal failure,…
Chapter 26 Solutions
Financial & Managerial Accounting
Ch. 26 - Prob. 1DQCh. 26 - Prob. 2DQCh. 26 - Why is a product-oriented layout preferred by lean...Ch. 26 - Prob. 4DQCh. 26 - Prob. 5DQCh. 26 - Why would a lean manufacturer strive to produce...Ch. 26 - Prob. 7DQCh. 26 - Prob. 8DQCh. 26 - Prob. 9DQCh. 26 - Why is the direct labor cost category eliminated...
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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