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Whitley Company had total sales of $1,000,000 for the year ending 20X1. The costs of quality are given below.
| Returns/allowances | $50,000 | ||
| Design changes | 60,000 | ||
| Prototype inspection | 13,000 | ||
| Downtime | 40,000 | ||
| Quality circles | 2,000 | ||
| Packaging inspection | 14,000 | ||
| Field testing | 6,000 | ||
| Complaint adjustment | 65,000 |
Required:
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Question & Answer: Whitley Company had total sales of $1,000,000 for the year ending 20X1. The costs of quality are given below……
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1. Prepare a quality cost report, classifying costs by category and expressing each category as a percentage of sales. Round your percentages to two decimal places.
| Whitley Company | |||
| Quality Cost Report | |||
| For the Year Ended 20X1 | |||
| Quality Costs | Percentage of sales | ||
| Prevention costs: | |||
| Quality circles | $ | ||
| Prototype inspection | % | ||
| Appraisal costs: | |||
| Field testing | $ | ||
| Packaging inspection | |||
| Internal failure costs: | |||
| Design changes | $ | ||
| Downtime | |||
| External failure costs: | |||
| Returns/allowances | $ | ||
| Complaint adjustment | |||
| Total quality costs | $ | ||
Expert Answer
Answer :- Quality cost report
| Particulars | Quality costs | Percentage of sales |
| Quality circles (Prevention costs)
Prototype inspection (Prevention costs) |
2000
13000 |
0.20 % (100 * 2000 / 1000000)
1.30 % (100 * 13000 / 1000000) |
| Field Testing (Appraisal costs)
Packaging inspection (Appraisal cost) |
6000
14000 |
0.60 % (100 * 6000 / 1000000)
1.40 % (100 * 14000 / 1000000) |
| Design changes (Internal failure costs)
Downtime (Internal failure costs) |
60000
40000 |
6.00 % (100 * 60000 / 1000000)
4.00 % (100 * 40000 / 1000000) |
| Returns / allowances (External failure cost)
Complaint adjustment (External failure costs) |
50000
65000 |
5.00 % (100 * 50000 / 1000000)
6.50 % (100 * 65000 / 1000000) |
| Total quality costs | 250000 | 25.00 % |
