Question

The following represents the financial information of Fabriz Corporation, a manufacturer of electronic components, for two months:

	March	April
Sales	540,000	500,000
Costs:
Process inspection	4,400	3,960
Scrap	3,900	4,860
Quality training	37,800	31,000
Warranty repairs	9,200	9,800
Testing equipment	16,000	16,000
Customer complaints	8,200	7,800
Rework	36,000	47,000
Preventive maintenance	30,000	20,000
Materials inspection	15,000	10,200
Field testing	19,200	25,800

a. Calculate the ratio of the prevention, appraisal, internal failure, and external failure costs to sales for March and April

Answer 1

	March	April
Sales              [A]	$        540,000	$        500,000
Prevention Cost
Process inspection	$            4,400	$            3,960
Quality Training	$          37,800	$          31,000
Preventive Maintanance	$          30,000	$          20,000
Material Inspection	$          15,000	$          10,200
Total Prevention Cost      [B]	$          87,200	$          65,160
Prevention Ratio to sales [B/A*100]	16.15%	13.03%
Appraisal Cost
Testing Equipment	$          16,000	$          16,000
Field Testing	$          19,200	$          25,800
Total appraisal Cost   [C]	$          35,200	$          41,800
Appraisal Ratio to sales [C/A*100]	6.52%	8.36%
Internal Failure Cost
Scrap	$            3,900	$            4,860
Rework	$          36,000	$          47,000
Total Internal Failure Cost [D]	$          39,900	$          51,860
Internal Failure ratio to sales [D/A*100]	7.39%	10.37%
External Failure Cost
Warrnaty Repairs	$            9,200	$            9,800
Custoer Complaints	$            8,200	$            7,800
Total External Failure Cost [E]	$          17,400	$          17,600
External Failure ratio to Sales [E/A*100]	3.22%	3.52%