Question

Crowder Manufacturing Company manufactures and sells ceiling fans. Crowder incurred the following costs related to quality for the year: Cost of warranty $35,000 Cost of employee quality training $27,000 Cost incurred to rework fans $18,000 Spoilage cost (net) $15,000 Cost of handling customer complaints $11,000 Depreciation cost of test equipment $ 6,000 Cost of quality circles $ 5,000 Maintenance cost of test equipment $ 3,000 Cost of retesting reworked fans $ 2,000 Cost of final testing of fans $ 1,000 Required:

a) Prepare a list of the costs, which are related to controlling quality and determine the total dollar amount of these costs.

b) Prepare a list of the costs, which are related to failing to control quality and determine the total dollar amount of these costs.

c) Explain why you might want to incur higher costs for controlling quality.

Answer 1

a)	List of cost related to controlling Quality
	S.no	Nature of cost	Amount(in $)
	1	Cost of Warranty	35000
	2	Cost of employye quality Training	27000
	3	Depreciation on test equipment	6000
	4	Cost of Quality Circles	5000
	5	Maintaince of Test equipment	3000
	6	Cost of Final testing	1000
			77000
b)	List of cost related to failing of controlling Quality
	S.no	Nature of cost	Amount(in $)
	1	Cost incurred to rework fans	18000
	2	Spoilage Cost	15000
	3	Cost of handling Customer Complaints	11000
	4	Cost of testing reworked fans	1000
			45000
c)	Reasons for incurring higher costs for controlling quality:
	1	Prevention is better then cure. So company want to maintain a good quality of the product which is sent into the market
	2	If number of complaints increases the goodwill of the producr will reduce in the market and effects the overall product market of the company