90.2K

Verified Solution

Link Copied!

The following information shows last years quality-related costs for the Madrigal Company:

Quality engineering	$600,000	Inspection of and testing of incoming materials	480,000
Warranty claims	2,814,000	Repair costs in the field	1,020,000
Product liability lawsuits	5,400,000	Statistical process control	300,000
Research of customer needs	90,000	Product recalls	2,400,000
Maintenance of test equipment	420,000	Waste	840,000
Returned products	1,440,000	Net cost of scrap	762,000
Rework costs	1,440,000	Product quality audits	570,000
Quality training	150,000	Downtime due to defects	150,000
Process control monitoring	1,200,000	Supplier certification	108,000

Total sales for the year were $120,000,000.

Prepare a cost-of-quality report grouping costs into prevention, appraisal, internal failure and external failure. Show each cost in total and as a percentage of sales.

Type of Cost	Annual Cost	Percent of Sales
Prevention Costs
Total
Appraisal Costs
Total
Internal Failure Costs
Total
External Failure Costs
Total
Total Quality Costs

Answer & Explanation Solved by verified expert

See Answer