Question

Acme Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its primary customers are aviation manufacturers and maintenance companies. The following table contains financial information pertaining to cost of quality (COQ) in 2019 and 2020 (in thousands of dollars):

	2019			2020
Sales	$	15,600		$	19,600
Materials inspection		260			56
In-process (production) inspection		156			121
Finished product inspection		210			66
Preventive equipment maintenance		16			56
Scrap (net)		460			260
Warranty repairs		660			410
Product design engineering		146			230
Vendor certification		24			56
Direct costs of returned goods		235			76
Training of factory workers		36			136
Product testing—equipment maintenance		56			56
Product testing labor		170			86
Field repairs		66			36
Rework before shipment		200			196
Product-liability settlement		320			56
Emergency repair and maintenance		160			71

Required:

1. Classify the cost items in the table into cost-of-quality (COQ) categories.

2. Calculate the ratio of each COQ category to revenues in each of the 2 years.

Classify the cost items in the table into cost-of-quality (COQ) categories. Calculate the ratio of each COQ category to revenues in each of the 2 years. (Enter amounts in thousands, not in whole dollar. Round your "Percentage" answers to 2 decimal places.)

	2019 2020 Amount % of Sales Amount % of Sales Cost of quality: Prevention costs: Total prevention costs $0 % $0 % Appraisal costs: Total appraisal costs $0 % $0 % Internal failure costs: Total internal failure costs $0 % $0 % External failure costs: Total external failure costs $0 % $0 % Total cost of quality (COQ) $0 % $0 %

Answer 1

Classification of costs and its % of sales is as follows:-