Question

You are given the following environmental quality-related costs:

Employee training	$	160,000
Product design		200,000
Supplier certification		70,000
Process inspection		350,000
Depreciation—pollution-control equipment		460,000
Maintain pollution-control equipment		260,000
Clean up polluted lake		560,000
Restore land after use		760,000
Property damage claim		660,000

Required:

1. Prepare a cost-of-quality (COQ) report of environmental management for the year. Determine subtotals for each of the four reporting categories, and express each subtotal as a percentage of total operating expenses ($10,000,000) for the year. (Hint: Classify the pollution-control costs as internal failure costs, under the assumption that the process pollutes and that the pollution-control equipment used by the company controls the release of pollutants into the environment.) (Round your percentage answers to 1 decimal place.)

Answer 1

ANSWER: Cost of Quality Report'

Head	Particulars	Amount	Sub total	Operating cost	% of operating cost
Prevention Costs:
	Employee training	$160,000
	Product design	$200,000
	Suppler certification	$70,000	$430,000	$10,000,000	4.3%
Appraisal costs:
	Process inspection	$350,000	$350,000	$10,000,000	3.5%
Internal failure costs	:
	Depreciation-pollution control equipment	$460,000
	Maintaining pollution control equipment	$260,000	$720,000	$10,000,000	7.2%
External failure costs:
	Lake clean-up	$560,000
	Land restoration	$760,000
	Property-damage claim	$660,000	$1,980,000	$10,000,000	19.8%
Total		$3,480,000