In: Accounting
The following represents the financial information for Domingo Corporation for two months.
March | April | |||||
Sales revenue | $ | 540,000 | $ | 430,000 | ||
Costs | ||||||
Process inspection | $ | 1,500 | $ | 1,840 | ||
Scrap | 1,940 | 1,870 | ||||
Quality training | 19,500 | 13,500 | ||||
Warranty repairs | 4,200 | 5,100 | ||||
Product testing equipment | 6,600 | 7,100 | ||||
Customer complaints | 2,900 | 3,100 | ||||
Rework | 16,000 | 19,500 | ||||
Preventive maintenance | 12,700 | 10,200 | ||||
Materials inspection | 7,400 | 5,000 | ||||
Field testing | 8,600 | 11,600 | ||||
Required:
a. Classify these items into Prevention, Appraisal, Internal failure, or External failure costs.
The following represents the financial information for Domingo Corporation for two months.
March | April | |||||
Sales revenue | $ | 540,000 | $ | 430,000 | ||
Costs | ||||||
Process inspection | $ | 1,500 | $ | 1,840 | ||
Scrap | 1,940 | 1,870 | ||||
Quality training | 19,500 | 13,500 | ||||
Warranty repairs | 4,200 | 5,100 | ||||
Product testing equipment | 6,600 | 7,100 | ||||
Customer complaints | 2,900 | 3,100 | ||||
Rework | 16,000 | 19,500 | ||||
Preventive maintenance | 12,700 | 10,200 | ||||
Materials inspection | 7,400 | 5,000 | ||||
Field testing | 8,600 | 11,600 | ||||
Required:
a. Classify these items into Prevention, Appraisal, Internal failure, or External failure costs.
b. Calculate the ratio of the prevention, appraisal, internal failure, and external failure costs to sales for March and April.
Activity | Category | |||
Process inspection | Prevention cost | |||
Scrap | Internal Failure Cost | |||
Quality trainning | Prevention cost | |||
Warranty repairs | External failure costs | |||
Product testing equipment | Appraisal Cost | |||
Customer complaints | External failure costs | |||
Rework | Internal Failure Cost | |||
Preventive inspection | Prevention cost | |||
Material inspection | Prevention cost | |||
Field testing | Appraisal Cost | |||
March | April | |||
Prevention cost | 7.6% | 7.1% | ||
Appraisal Cost | 2.8% | 4.3% | ||
Internal Failure Cost | 3.3% | 5.0% | ||
External failure costs | 1.3% | 1.9% | ||
Workings: | ||||
March | April | |||
Annual Cost | % of Sales | Annual Cost | % of Sales | |
(a) | [(a) / $540000] | (b) | [(b) / $430000 | |
Sales | $ 5,40,000 | $ 4,30,000 | ||
Prevention cost | ||||
Process inspection | $ 1,500 | $ 1,840 | ||
Quality trainning | $ 19,500 | $ 13,500 | ||
Preventive inspection | $ 12,700 | $ 10,200 | ||
Material inspection | $ 7,400 | $ 5,000 | ||
Total | $ 41,100 | 7.6% | $ 30,540 | 7.1% |
Appraisal Cost | ||||
Product testing equipment | $ 6,600 | $ 7,100 | ||
Field testing | $ 8,600 | $ 11,600 | ||
Total | $ 15,200 | 2.8% | $ 18,700 | 4.3% |
Internal Failure Cost | ||||
Scrap | $ 1,940 | $ 1,870 | ||
Rework | $ 16,000 | $ 19,500 | ||
Total | $ 17,940 | 3.3% | $ 21,370 | 5.0% |
External failure costs | ||||
Warranty repairs | $ 4,200 | $ 5,100 | ||
Customer complaints | $ 2,900 | $ 3,100 | ||
Total | $ 7,100 | 1.3% | $ 8,200 | 1.9% |
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