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In: Accounting

Meagher Solutions Inc. manufactures memory chips for personal computers. An activity analysis was conducted, and the...

Meagher Solutions Inc. manufactures memory chips for personal computers. An activity analysis was conducted, and the following activity costs were identified with the manufacture and sale of memory chips:

a. Identify the cost of quality classification for each activity.

Quality Activities Activity Cost Quality Cost Classification
Correct shipment errors $150,000
Disposing of scrap 95,000
Emergency equipment maintenance 125,000
Employee training 50,000
Final inspection 80,000
Inspecting incoming materials 60,000
Preventive equipment maintenance 40,000
Processing customer returns 90,000
Scrap reporting 45,000
Supplier development 15,000
Warranty claims 250,000
Total $1,000,000

b. Prepare a cost of quality report. Assume that the sales for the period were $4,000,000. If required, round percents to one decimal place.

Meagher Solutions Inc.
Cost of Quality Report
Quality Cost
Classification
Quality Cost Percent of Total
Quality Cost
Percent of
Total Sales
Prevention $ % %
Appraisal % %
Internal failure % %
External failure % %
Total $ % %

c. The category with the fewest number of quality activities is  . Nearly fifty percent of the quality activity costs are  . The highest single cost is warranty claims, which is a(n)  . Disposing of scrap, emergency equipment maintenance, and scrap reporting are all  .

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