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Problem 12-19 (Algo) Quality Cost Report [LO12-2]

In response to intensive foreign competition, the management of Florex Company has attempted over the past year to improve the quality of its products. A statistical process control system has been installed and other steps have been taken to decrease the amount of warranty and other field costs, which have been trending upward over the past several years. Costs relating to quality and quality control over the last two years are given below:

	Costs (in thousands)
	Last Year	This Year
Inspection	$ 900	$ 1,701
Quality engineering	$ 270	$ 675
Depreciation of test equipment	$ 675	$ 270
Rework labor	$ 990	$ 1,620
Statistical process control	$ 0	$ 225
Cost of field servicing	$ 1,350	$ 1,080
Supplies used in testing	$ 45	$ 54
Systems development	$ 630	$ 900
Warranty repairs	$ 3,825	$ 1,530
Net cost of scrap	$ 810	$ 1,080
Product testing	$ 1,080	$ 1,350
Product recalls	$ 3,105	$ 990
Disposal of defective products	$ 720	$ 1,080

Sales have been flat over the past few years, at $90,000,000 per year. A great deal of money has been spent in the effort to upgrade quality, and management is anxious to see whether or not the effort has been effective.

Required:

1. Prepare a quality cost report that contains data for both this year and last year. (Enter amount values in thousands. Round your percentage answers to 2 decimal places (i.e 0.1234 should be entered as 12.34).)

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