Question

Walton Company has measured its quality costs for the past two years. After the company gathers its quality cost data, it summarizes those costs using the four categories shown below:

		Last Year			This Year
Prevention costs		$	357,000		$	650,000
Appraisal costs		$	445,000		$	545,000
Internal failure costs		$	790,000		$	500,000
External failure costs		$	1,100,000		$	680,000

Required:

1. Calculate the total cost of quality last year and this year.

2. For last year, calculate the cost in each of the four categories as a percent of the total cost of quality. (Round your answers to 1 decimal place.)

3. For this year, calculate the cost in each of the four categories as a percent of the total cost of quality. (Round your answers to 1 decimal place.)

4-a. Calculate the change in total cost of quality over the two-year period.

Answer 1

Solution: 1
CALCULTION OF TOTAL COST OF QUALITY FOR LAST YEAR & THIS YEAR
Quality Cost	Last Year	This Year
Prevention Costs	$                     357,000	$                     650,000
Appraisal Costs	$                     445,000	$                     545,000
Internal Failure Costs	$                     790,000	$                     500,000
External Failure Costs	$                 1,100,000	$                     680,000
Total Costs	$                 2,692,000	$                 2,375,000
Solution: 2
CALCULATION OF EACH CATEGORIES AS A PERCENTAGE OF TOTAL COST OF QUALITY OF LAST YEAR
Quality Cost	Last Year	Percentage
Prevention Costs	$                     357,000	13.3%
Appraisal Costs	$                     445,000	16.5%
Internal Failure Costs	$                     790,000	29.3%
External Failure Costs	$                 1,100,000	40.9%
Total Costs	$                 2,692,000	100.0%
Solution: 3
CALCULATION OF EACH CATEGORIES AS A PERCENTAGE OF TOTAL COST OF QUALITY OF THIS YEAR
Quality Cost	This Year	Percentage
Prevention Costs	$                     650,000	27.4%
Appraisal Costs	$                     545,000	22.9%
Internal Failure Costs	$                     500,000	21.1%
External Failure Costs	$                     680,000	28.6%
Total Costs	$                 2,375,000	100.0%
Solution: 4 -a
Calculation of change in Total Cost of Quality over the two period
Change in Total Cost of Qulaity =	Total Cost of Quality for Last Year	"-"	Total Cost of Quality for This Year
Change in Total Cost of Qulaity =	$                 2,375,000	"-"	$               2,692,000
Change in Total Cost of Qulaity =	$                   -317,000
Answer = $ - 317,000