The following information shows last year\'s quality relatedcosts for the Renwal
ID: 2433884 • Letter: T
Question
The following information shows last year's quality relatedcosts for the Renwal Company: Item Amount Qualityengineering 500,000 Warrantyclaims 2,345,000 Product liabilitylawsuits 4,500,000 Research of customerneeds 75,000 Maintenance of testequipment 350,000 RequiredProducts 1,200,000 Reworkcosts 1,200,000 Qualitytraining 1 25,000 Process controlmonitoring 1,000,000 Inspection of and testing of incoming materials 400,000 Repair costs in thefield 850,000 Statistical processcontrol 250,000 Productrecalls 2,000,000 Waste 700,000 Net cost ofscrap 635,000 Product qualityaudits 475,000 Downtime due todefects 125,000 Suppliercertification 90,000 Total Sales for the year were 100,000,000 a. Prepare a cost of quality report grouping costs intoprevention, appraisal, internal failure, and externalfailure. Also show costs as a percent of sales. b. Interpret the data and make recommendations toRenwal's management. The following information shows last year's quality relatedcosts for the Renwal Company: Item Amount Qualityengineering 500,000 Warrantyclaims 2,345,000 Product liabilitylawsuits 4,500,000 Research of customerneeds 75,000 Maintenance of testequipment 350,000 RequiredProducts 1,200,000 Reworkcosts 1,200,000 Qualitytraining 1 25,000 Process controlmonitoring 1,000,000 Inspection of and testing of incoming materials 400,000 Repair costs in thefield 850,000 Statistical processcontrol 250,000 Productrecalls 2,000,000 Waste 700,000 Net cost ofscrap 635,000 Product qualityaudits 475,000 Downtime due todefects 125,000 Suppliercertification 90,000 Total Sales for the year were 100,000,000 a. Prepare a cost of quality report grouping costs intoprevention, appraisal, internal failure, and externalfailure. Also show costs as a percent of sales. b. Interpret the data and make recommendations toRenwal's management.Explanation / Answer
Amount
% of Sales
100,000,000
100%
500,000
75,000
1,200,000
125,000
475,000
90,000
2,465,000
2.465%
350,000
400,000
1,000,000
850,000
250,000
2,850,000
2.85%
1,200,000
700,000
635,000
125,000
2,660,000
2.66%
2,345,000
4,500,000
2,000,000
8,845,000
8.845%
16,820,000
16.82%
Amount
% of Sales
Sales100,000,000
100%
Prevention Cost Quality engineering500,000
Research of customerneeds75,000
Required Products1,200,000
Quality training125,000
Product quality audits475,000
Supplier certification90,000
2,465,000
2.465%
Appraisal Cost Maintenance of testequipment350,000
Inspection of andtesting of incoming materials400,000
Process controlmonitoring1,000,000
Repair costs in thefield850,000
Statistical process control250,000
2,850,000
2.85%
Internal Failure Cost Rework costs1,200,000
Waste700,000
Net cost of scrap635,000
Downtime due to defects125,000
2,660,000
2.66%
External Failure Cost Warranty claims2,345,000
Product liability lawsuits4,500,000
Product recalls2,000,000
8,845,000
8.845%
Total Quality Cost16,820,000
16.82%
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