Question

Exercise 14.12 Quality Cost Report Kang Company reported sales of $3,240,000 in 20x5. At the end of the calendar year, the fol- lowing quality costs were reported: $162,000 54,000 27,000 21,600 54,000 27,000 18,900 108,000 Design review Recalls Reinspection Materials inspection Quality training Process acceptance Scrap Lost sales Product inspection Returned goods 16,200 51,300 Required: Prepare a quality cost report. 1. Prepare a graph (pie chart or bar graph) that shows the relative distribution of quality costs and comment on the distribution. 2.

Answer 1

Answer of 1.

There may be mainly following heads for the purpose of quality Cost Report.

1.Appraisal Costs/Measurement Costs

2.Prevention Costs

3. Internal Failure Costs

4. External Failure Costs

We can classify the costs given in the problem as per above headings.

1.Appraisal Costs/Measurement Costs: Reinspection $27,000, Material inspection $21,600,

Process acceptance $27,000, Design review $1,62,000

2.Prevention Costs: Quality training $54,000, Product inspection $16,200

3. Internal Failure Costs: Scrap $18,900, recalls $54,000,Lost sales $1,08,000

4. External Failure Costs: Returned goods $51,300.

Quality Cost chart 250000 200000 150000 100000 50000 2. Prevention Costs 1. Appraisal Costs/Measurement Costs 3. Internal Failure Costs 4. External Failure Costs

Answer for 2.

Chart is there in attachment

Conclusion According to the chart , from study we can find that company is incurring Appraisal cost of $ 2,37,600 and still it spent $1,80,000 in internal failure cost which means that internal control system of the company is not good due to which company is loosing huge resources.