Costs of quality Scan It Company manufactures computer scann

Costs of quality. Scan It Company manufactures computer scanners. The following table presents financial information for two years Year 1 Year 2 $2,000,000 $1,800,000 Quality Costs: Scrap Repair of returned goods Dealing with customer complai Rework (goods spoiled during production) 15,000 35,000 23,000 150,000 55,000 16,000 40,000 28,000 150,000 40,000 a. Classify the above items into prevention, appraisal, internal failure, or external failure costs. b. Calculate the percentage of each prevention, appraisal, internal failure, and external failure cost to sales for Year 1 and Year 2

Solution

Answer a & b. Year 1 Year 2 Amount % of Cost to Sales Amount % of Cost to Sales Prevention Costs Material Inspection Costs          55,000.00 2.75%          40,000.00 2.22% Total Prevention Costs          55,000.00 2.75%          40,000.00 2.22% Internal Failure Costs Scrap          15,000.00 0.75%          16,000.00 0.89% Rework (goods spoiled during production)        150,000.00 7.50%        150,000.00 8.33% Total Internal Failure Costs        165,000.00 8.25%        166,000.00 9.22% External Failure Costs Repair of returned goods          35,000.00 1.75%          40,000.00 2.22% Dealing with customer complaints          23,000.00 1.15%          28,000.00 1.56% Total External Failure Costs          58,000.00 2.90%          68,000.00 3.78%