Question

In: Operations Management

Below are the quality costs data for a company for 2014 & 2015 2014 2015 Prevention...

Below are the quality costs data for a company for 2014 & 2015 2014 2015 Prevention $90,000 $110,000 Appraisal $50,000 $62,000 Internal Faliure $40,000 $34,000 External Faliure $62,000 $60,000 Sales: $5,100,000 $5,350,000 A) whats the precentage change in the total quality index between 2014 & 2015 B) What is the percentage change in the precention quality index between 2014 & 2015 C) What is the percentage change in the internal faliure quality index between 2014 & 2015 ? D) Do you think this company is on the right track investing more in quality improvements? Please explain using the above data.

Solutions

Expert Solution

QUALITY COSTS

2014

2015

Prevention

$90,000

$110,000

Appraisal

$50,000

$62,000

Internal Failure

$40,000

$34,000

External Failure

$62,000

$60,000

SALES

$5,100,000

$5,350,000

A) percentage change in the total quality index between 2014 & 2015:

TOTAL QUALITY INDEX = TOTAL QUALITY COSTS/SALES

2014

2015

Total Quality costs

$242,000

$266,000

Sales

$5,100,000

$5,350,000

total quality index

0.04745

0.04972

% change

4.78%

B) Prevention Quality Index = Prevention Cost/Sales

Prevention

$90,000

$110,000

SALES

$5,100,000

$5,350,000

Prevention quality index

0.0176471

0.0205607

Percentage change

16.51%

C) Internal Failure quality Index = Internal failure costs/ Sales

Internal Failure

$40,000

$34,000

SALES

$5,100,000

$5,350,000

internal Failure quality index

0.0078431

0.0063551

Percentage change

-18.97%

D) Yes, the company is on the right track, investing more in quality improvements, as after investing more in quality improvements (higher prevention and appraisal costs) the cost of poor quality (internal and external failure) is decreasing.

Prevention

$90,000

$110,000

Appraisal

$50,000

$62,000

Cost of Achieving Good Quality=

$140,000

$172,000

SALES

$5,100,000

$5,350,000

Quality index

0.027451

0.0321495

% change

17.12%

Internal Failure

$40,000

$34,000

External Failure

$62,000

$60,000

Cost of Poor Quality

$102,000

$94,000

SALES

$5,100,000

$5,350,000

Quality Index

0.02

0.0175701

% change

-12.15%

A negative percentage change in the cost of poor quality index indicates the quality investments have brought down the cost of poor quality.

Formulae Used:

keosha answered 7 months ago
Next > < Previous

Related Solutions

Below are the quality costs data for a company for 2014 & 2015 2014 2015 Prevention...
Below are the quality costs data for a company for 2014 & 2015 2014 2015 Prevention $90,000 $110,000 Appraisal $50,000 $62,000 Internal Faliure $40,000 $34,000 External Faliure $62,000 $60,000 Sales: $5,100,000 $5,350,000 A) whats the precentage change in the total quality index between 2014 & 2015 B) What is the percentage change in the precention quality index between 2014 & 2015 C) What is the percentage change in the internal faliure quality index between 2014 & 2015 ? D) Do...
The condensed financial statements of Murawski Company for the years 2014 and 2015 are presented below....
The condensed financial statements of Murawski Company for the years 2014 and 2015 are presented below. MURAWSKI COMPANY Balance Sheets December 31 2015 2014 Current assets     Cash and cash equivalents $ 364 $ 367     Accounts receivable (net) 387 466     Inventory 373 446     Prepaid expenses 140 131       Total current assets 1,264 1,410 Property, plant, and equipment 363 434 Investments 11 11 Intangibles and other assets 530 545       Total assets $2,168 $2,400 Current liabilities $ 801 $ 881 Long-term liabilities 355 406...
"There is a cost attached to providing quality products. These costs consist of prevention costs, appraisal...
"There is a cost attached to providing quality products. These costs consist of prevention costs, appraisal cost, internal failure costs and external failure costs." Discuss the Statement.
The condensed financial statements of Marks Company for the years 2014-2015 are presented below: Marks Company...
The condensed financial statements of Marks Company for the years 2014-2015 are presented below: Marks Company Comparative Balance Sheets As of December 31, 2014 and 2015 2015    2014    Cash $367,000 $134,000 Accounts receivable (net) 373,000    308,000    Inventories 379,000    342,000    Plant and equipment 1,850,000 1,116,000 Accumulated depreciation (263,000 ) (192,000 )    $2,706,000 $1,708,000    Accounts payable $342,000 $163,000 Dividends payable -0-    43,000    Bonds payable 400,000    -0- Common stock ($10 par) 1,523,000...
Cysco Corp has a budget of $1,200,000 in 2015 for prevention costs. If it decides to...
Cysco Corp has a budget of $1,200,000 in 2015 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $100,000 in variable costs. The new method will require $50,000 in training costs and $140,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 200,000 units. Appraisal costs for the year are budgeted at $500,000. The...
Dylan Products has a budget of $1,200,000 in 2015 for prevention costs. If it decides to...
Dylan Products has a budget of $1,200,000 in 2015 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $90,000 in variable costs. The new method will require $40,000 in training costs and $150,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 210,000 units. Appraisal costs for the year are budgeted at $500,000. The...
Classify the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure...
Classify the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs: 1. Internal audit to ensure that quality guidelines and processes are being followed 2. Repairing products in the field 3. Providing engineering assistance to selected suppliers to improve their product quality 4. Correcting a design error discovered during product development 5. Settling a bodily injury law suit caused by a defective product 6. Customer complaint department 7. Quality control circles 8. Continuing supplier...
Describe COST OF QUALITY in detail? (Prevention Cost and other related Costs)
Describe COST OF QUALITY in detail? (Prevention Cost and other related Costs)
Wilson Company had the following quality costs for 2014: Testing      $ 120,000 Rework           55,000 Training...
Wilson Company had the following quality costs for 2014: Testing      $ 120,000 Rework           55,000 Training           90,000 Product liability insurance           70,000 Quality planning           86,000 Customer surveys           30,000 Re-inspection and retesting           35,000 Warranty repairs         100,000 Total quality costs         $ 586,000 Sales for 2014 were $2,000,000. What is the amount of appraisal costs?
KORBIN COMPANY Comparative Income Statements For Years Ended December 31, 2015, 2014, and 2013 2015 2014...
KORBIN COMPANY Comparative Income Statements For Years Ended December 31, 2015, 2014, and 2013 2015 2014 2013   Sales $ 450,688 $ 345,264 $ 239,600   Cost of goods sold 271,314 216,826 153,344   Gross profit 179,374 128,438 86,256   Selling expenses 63,998 47,646 31,627   Administrative expenses 40,562 30,383 19,887   Total expenses 104,560 78,029 51,514   Income before taxes 74,814 50,409 34,742   Income taxes 13,915 10,334 7,053   Net income $ 60,899 $ 40,075 $ 27,689 KORBIN COMPANY Comparative Balance Sheets December 31, 2015, 2014, and...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT