Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Textbook Question
Chapter 27, Problem 4PB
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.
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 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…
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…
The following situations describe decision scenarios that could use managerial accounting information:
The manager of High Times Restaurant wishes to determine the price to charge for various lunch plates.
By evaluating the cost of leftover materials, the plant manager of a precision tool facility wishes to determine how effectively the plant is being run.
The division controller of West Coast Supplies needs to determine the cost of products left in inventory.
The manager of the Maintenance Department of a large manufacturing company wishes to plan next year’s anticipated expenditures. For each situation, discuss how managerial accounting information could be used.
b) What are the major differences between managerial accounting and financial accounting?
Chapter 27 Solutions
Financial And Managerial Accounting
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Ch. 27 - Prob. 11DQCh. 27 - What is the benefit of identifying non-value-added...Ch. 27 - In what ways can the cost of a process be...Ch. 27 - Lead time Blues Inc. manufactures jeans in the...Ch. 27 - Prob. 2BECh. 27 - Lean accounting The annual budgeted conversion...Ch. 27 - Cost of quality report A quality control activity...Ch. 27 - Process activity analysis Roen Company incurred an...Ch. 27 - Lean principles The chief executive officer (CEO)...Ch. 27 - Prob. 2ECh. 27 - Lean principles Rag Swag Inc. manufactures various...Ch. 27 - Lead time analysis Furry Friends Inc. manufactures...Ch. 27 - Reduce setup time Vernon Inc. has analyzed the...Ch. 27 - Compute lead time Jackson Fabricators Inc....Ch. 27 - Calculate lead time Williams Optical Inc. is...Ch. 27 - Suppy chain management The following is an excerpt...Ch. 27 - Employee involvement Quickie Designs Inc. uses...Ch. 27 - Lean principles for a restaurant The management of...Ch. 27 - Accounting issues in a lean environment Eon...Ch. 27 - Lean accounting Westgate Inc. uses a lean...Ch. 27 - Lean accounting Modern Lighting Inc. manufactures...Ch. 27 - Lean accounting Vintage Audio Inc. manufactures...Ch. 27 - Pareto chart Meagher Solutions Inc. manufactures...Ch. 27 - Cost of quality report A. Using the information in...Ch. 27 - Pareto chart for a service company Three Rivers...Ch. 27 - Cost of quality and value-added/non-value-added...Ch. 27 - Process activity analysis The Brite Beverage...Ch. 27 - Process activity analysis for a service company...Ch. 27 - Prob. 21ECh. 27 - Lean principles Bright Night, Inc., manufactures...Ch. 27 - Lead time Sound Tek Inc. manufactures electronic...Ch. 27 - Lean accounting Dashboard Inc. manufactures and...Ch. 27 - Pareto chart and cost of quality report for a...Ch. 27 - Prob. 1PBCh. 27 - Lead time Master Chef Appliance Company...Ch. 27 - Lean accounting Com-Tel Inc. manufactures and...Ch. 27 - Pareto chart and cost of quality report for a...Ch. 27 - Make a Decision Lean Performance for...Ch. 27 - Prob. 2MADCh. 27 - Prob. 3MADCh. 27 - Prob. 4MADCh. 27 - Ethics in Action In August, Lannister Company...Ch. 27 - Communication Ethan Fromme, the chief financial...Ch. 27 - Leese Inc. has the following quality financial...Ch. 27 - When measuring the cost of quality, the cost of...Ch. 27 - In measuring the cost of quality, which one of the...Ch. 27 - External failure costs include all of the...
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