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In: Operations Management

Pareto Chart and A report summarizing the costs, percent of total, and percent of sales by...

Pareto Chart and A report summarizing the costs, percent of total, and percent of sales by appraisal, prevention, internal failure, and external failure cost of quality categories.Cost of Quality Report for a Manufacturing Company

The president of Mission Inc. has been concerned about the growth in costs over the last several years. The president asked the controller to perform an The study of employee effort and other business records to determine the cost of activities.activity analysis to gain a better insight into these costs. The result of the activity analysis is summarized as follows:

Required:

1. Classify the activities into prevention, appraisal, internal failure, external failure, and not costs of quality (producing product). Classify the activities into value-added and non-value added activities.

Activity	Activity Cost	Cost of Quality Classification	VA/NVA
Correcting invoice errors	$19,080	Appraisal External failure Internal failure Not a quality cost Prevention	Non-value-added Value-added
Disposing of incoming materials with poor quality	15,900	Appraisal External failure Internal failure Not a quality cost Prevention	Non-value-added Value-added
Disposing of scrap	41,340	Appraisal External failure Internal failure Not a quality cost Prevention	Non-value-added Value-added
Expediting late production	34,980	Appraisal External failure Internal failure Not a quality cost Prevention	Non-value-added Value-added
Final inspection	22,260	Appraisal External failure Internal failure Not a quality cost Prevention	Non-value-added Value-added
Inspecting incoming materials	6,360	Appraisal External failure Internal failure Not a quality cost Prevention	Non-value-added Value-added
Inspecting work in process	34,980	Appraisal External failure Internal failure Not a quality cost Prevention	Non-value-added Value-added
Preventive machine maintenance	22,260	Appraisal External failure Internal failure Not a quality cost Prevention	Non-value-added Value-added
Producing product	104,940	Appraisal External failure Internal failure Not a quality cost Prevention	Non-value-added Value-added
Responding to customer quality complaints	15,900	Appraisal External failure Internal failure Not a quality cost Prevention	Non-value-added Value-added
Total	$318,000

2. On paper or in a spreadsheet program, prepare a Pareto chart for each of the activities listed above. Answer the following:

What type of chart is a Pareto chart?

Bar chart
Line chart
Organization chart
Pie chart

Which activity appears first, in order from left to right?

Disposing of scrap
Correcting invoice errors
Expediting late production
Inspecting work in process
Producing product

3. Use the activity cost information to determine the percentages of total department costs that are prevention, appraisal, internal failure, external failure, and not The cost associated with controlling quality (prevention and appraisal) and failing to control quality (internal and external failure)costs of quality. If required, round percentages to one decimal place.

Quality Cost Classification	Activity Cost	Percent of Total Department Cost
Prevention	$	%
Appraisal		%
Internal failure		%
External failure		%
Not a cost of quality		%
Total	$	%

4. Determine the percentages of total department costs that are value-added and non-value-added. If required, round percentages to one decimal place.

	Activity Cost	Percent of Total Department Cost
Value-added	$	%
Non-value-added		%
Total	$	%

5. The department has 40% of its total costs as

non-value-added
value-added

Appraisal
External failure
Internal failure
Prevention

costs represent 29% of the total costs. This means there is

little
significant

opportunity for cost savings.

Appraisal
External failure
Internal failure
Prevention

costs represent 11% of the total department costs.

Lead Time

Sound Tek Inc. manufactures electronic stereo equipment. The manufacturing process includes printed circuit (PC) board assembly, final assembly, testing, and shipping. In the PC board assembly operation, a number of individuals are responsible for assembling electronic components into printed circuit boards. Each operator is responsible for soldering components according to a given set of instructions. Operators work on batches of 50 printed circuit boards. Each board requires 4 minutes of board assembly time. After each batch is completed, the operator moves the assembled boards to the final assembly area. This move takes 11 minutes to complete.

The final assembly for each stereo unit requires 20 minutes and is also done in batches of 50 units. A batch of 50 stereos is moved into the test building, which is across the street. The move takes 20 minutes. Before conducting the test, the test equipment must be set up for the particular stereo model. The test setup requires 30 minutes. The units wait while the setup is performed. In the final test, the 50-unit batch is tested one at a time. Each test requires 10 minutes. The completed batch, after all testing, is sent to shipping for packaging and final shipment to customers. A complete batch of 50 units is sent from testing to shipping. The Shipping Department is located next to testing. Thus, there is no move time between these two operations. Packaging and labeling requires 9 minutes per unit.

1. Determine the amount of value-added and non-value-added lead time and the value-added ratio in this process for an average stereo unit in a batch of 50 units. Categorize the non-value-added time into wait and move time. Round the percentage to one decimal place.

Value-added lead time			min.
Non-value-added lead time:
	Wait time lead time	min.
	Move time lead time	min.
Total non-value-added lead time			min.
Total lead time			min.
Value-added ratio (as a percent)			%

2. Move time in this process could best be reduced by:

a. Doing nothing.

b. Changing the layout from a process orientation to a product orientation.

c. Increasing batch sizes.

d. Eliminating the testing step.

e. Hiring more workers.

Solutions

Expert Solution

Activity	Activity Cost	Cost of Quality Classification	VA/NVA
Correcting invoice errors	19,080	External failure	Non-value-added
Disposing of incoming materials with poor quality	15,900	Internal failure	Non-value-added
Disposing of scrap	41,340	Internal failure	Non-value-added
Expediting late production	34,980	Internal failure	Non-value-added
Final inspection	22,260	Appraisal	Non-value-added
Inspecting incoming materials	6,360	Appraisal	Non-value-added
Inspecting work in process	34,980	Appraisal	Non-value-added
Preventive machine maintenance	22,260	Prevention	Value-added
Producing product	1,04,940	Not a quality cost	Value-added
Responding to customer quality complaints	15,900	External failure	Non-value-added
Total	$318,000

2. On paper or in a spreadsheet program, prepare a Pareto chart for each of the activities listed above. Answer the following:

What type of chart is a Pareto chart?

Bar chart

Which activity appears first, in order from left to right?

Disposing of scrap

		Percent of total department cost
Prevention	22260	0.07
Appraisal	63600	0.2
Internal failure	92220	0.29
External failure	34980	0.11
Not a quality cost	104940	0.33
total	318000

4. Determine the percentages of total department costs that are value-added and non-value-added. If required, round percentages to one decimal place.

		Percent of total department cost
Value-added	127200	0.4
Non-value-added	190800	0.6
total	318000

5. The department has 40% of its total costs as costs

value-added

Internal failure represent 29% of the total costs. This means there is ------------ opportunity for cost savings

significant

costs represent 11% of the total department costs

External failure

EXPLANATION

Costs of quality are the costs incurred because poor quality may or does exist

Prevention costs are incurred to prevent poor quality in the products or services being produce

. Examples - quality training pro-grams, quality planning,

Appraisal costs are incurred to determine whether products are con-forming to their requirements/specifications

Examples include inspecting and testing materials

Internal failure costs are incurred when products do not conform to specifications and are detected prior to being delivered to consumers.

Examples - scrap, rework, retesting

.External failure costs - incurred when products and services fail to conform to requirements after being delivered to customers.

Examples- returns and allowances, war-ranties, repairs,

Value added and are non value-added

1. not a cost of quality

Production

2.Costs of quality

Appraisal and failure activities and their associated costs are non value-added
Prevention activities are value-added

	Activity	Activity Cost	Cost of Quality Classification	VA/NVA
	Correcting invoice errors	19,080	External failure	Non-value-added
assuming these are materials prodcued	Disposing of incoming materials with poor quality	15,900	Internal failure	Non-value-added
	Disposing of scrap	41,340	Internal failure	Non-value-added
	Expediting late production	34,980	Internal failure	Non-value-added
	Final inspection	22,260	Appraisal	Non-value-added
assuming these are materials prodcued	Inspecting incoming materials	6,360	Appraisal	Non-value-added
	Inspecting work in process	34,980	Appraisal	Non-value-added
	Preventive machine maintenance	22,260	Prevention	Value-added
	Producing product	1,04,940	Not a quality cost	Value-added
	Responding to customer quality complaints	15,900	External failure	Non-value-added
	Total	$318,000

Pareto

A bar chart that shows the totals of a particular attribute for a number of categories, ranked left to right from the largest to smallest totals

asd

keosha answered 2 years ago

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