Question

At the end of 1998, Barton Company recorded the following quality costs:

design review	$75.000
product withdrawals	25.000
Re-checking	40.000
material inspection	30.000
quality training	40.000
Process evaluation	28.000
The remaining raw materials	45.000
Lost of sales	30.000
rating of Product	10.000
Returned items	10.000

REQUESTED:
1. Make a quality cost report by listing costs according to categories.
2.Are there hidden costs in the report? Explain.

Answer 1

Step 1:
Particulars	Amount In $
Preventive
Design review	$75.000
Quality training	$40.000
Process evaluation	$28.000
	$143.000
Appraisal
Material Inspection	30.000
	30.000
internal failure
Re checking	$40.000
Rating of product	$10.000
The remaining raw material	$45.000
	$95.000
External failure
Lost of sales	$30.000
Product withdrawal	$25.000
Returned items	$10.000
	$65.000

Step 2
Hidden cost are external failure cost include cost of loss of customer, loyalty, image loss and brand damage
For example in striving to return lost customers more resources are required for support. With no means
provided for control of hidden external failure cost. Organisations activity can become unprofitable
In the above report lost of sales is the hidden cost due to poor quality.