vntkj Mercury, Incorporated, produces cell phones at its plant In Texas. A year ago, a consumer survey ranked the company's cell phoneslow in product quality. Shocked by this result, Jorge Gomez, Mercury's president, set up a task force to Implement a formal qualityImprovement program. Included on this task force were representatives from the Engineering, Marketing. Customer Service.Production, and Accounting departments. After working together for a year, the task force prepared the quality cost report shownbelow:Prevention costs:Machine maintenanceTraining suppliersQuality circlesTotal prevention costAppraisal costs:Incoming inspectionFinal testingTotal appraisal costMercury, IncorporatedQuality Cost Report(in thousands)Last Year This Year$ 89$ 139829В3989207395999109138168Internal failure costs:Rework69149Scrap5989Total internal failure cost128238External failure costs:Warranty repairs10949Customer returns33999Total external failure cost448148Total quality cost$ 803$ 761Total production cost$ 5,150$ 5,750Required:Expand the company's quality cost report by showing the costs in both years as percentages of both total production cost and totalquality cost.Note: Round your percentage answers to 1 decimal place (ie 0.1234 should be entered as 12.3).AmountMercury, IncorporatedQuality Cost Report(in thousands)Last YearPercentage ofTotal ProductionThis YearCostPrevention costs:Machine maintenanceS89Training suppliersQuality circlesTotal prevention costs089Percentage ofTotal QualityAmountPercentage ofTotal ProductionPercentage ofTotal QualityCostCostCostS1392939207Appraisal costs:Incoming inspection3959Final testing99109Total appraisal costs138168Internal failure costs:Rework69149Scrap5989Total internal failure costs128238External failure costs:Warranty repairs10949Customer returns33999Total external failure costs448148Total quality cost$803S781Total production costS5,150S5,750

The quality costs include costs incurred in making a quality product. Quality costs are categorised…

Mercury, Incorporated, produces cell phones at its plant In Texas. A year ago, a consumer survey ranked the company's cell phones ow in product quality. Shocked by this result, Jorge Gomez, Mercury's president, set up a task force to implement a formal quality Improvement program. Included on this task force were representatives from the Engineering. Marketing. Customer Service. Production, and Accounting departments. After working together for a year, the task force prepared the quality cost report shown below: Prevention costs: Machine maintenance Training suppliers Quality circles Total prevention cost Appraisal costs: Incoming inspection Final testing Total appraisal cost Rework Mercury, Incorporated Quality Cost Report (in thousands) Last Year This Year $89 $139 е 29 е 39 89 207 39 59 99 109 138 168 Internal failure costs: 69 149 Scrap 59 89 Total internal failure cost 128 238 External failure costs: Warranty repairs 109 49 Customer returns Total quality cost 339 99 Total external failure cost 448 148 $ 803 $5,150 $761 $5,750 Total production cost Required: 1. Expand the company's quality cost report by showing the costs in both years as percentages of both total production cost and total quality cost. Note: Round your percentage answers to 1 decimal place (l.e 0.1234 should be entered as 12.3). Mercury, Incorporated Quality Cost Report (in thousands) Last Year Amount Percentage of Total Production Cost Percentage of Total Quality Cost Amount This Year Percentage of Total Production Percentage of Total Quality Cost Cost Prevention costs: Machine maintenance $ 89 Training suppliers 0 Quality circles 0 Total prevention costs 89 $ 139 29 39 207 Appraisal costs: Incoming inspection 39 50 Final testing 99 109 Total appraisal costs 138 168 Internal failure costs: Rework 69 149 Scrap 59 89 Total internal failure costs 128 238 External failure costs: Warranty repairs 109 49 Customer returns 339 99 Total external failure costs 448 148 Total quality cost $ 803 $ 761 Total production cost $ 5,150 $ 5,750

Mercury, Incorporated, produces cell phones at its plant In Texas. A year ago, a consumer survey ranked the company's cell phones ow in product quality. Shocked by this result, Jorge Gomez, Mercury's president, set up a task force to implement a formal quality Improvement program. Included on this task force were representatives from the Engineering. Marketing. Customer Service. Production, and Accounting departments. After working together for a year, the task force prepared the quality cost report shown below: Prevention costs: Machine maintenance Training suppliers Quality circles Total prevention cost Appraisal costs: Incoming inspection Final testing Total appraisal cost Rework Mercury, Incorporated Quality Cost Report (in thousands) Last Year This Year $89 $139 е 29 е 39 89 207 39 59 99 109 138 168 Internal failure costs: 69 149 Scrap 59 89 Total internal failure cost 128 238 External failure costs: Warranty repairs 109 49 Customer returns Total quality cost 339 99 Total external failure cost 448 148 $ 803 $5,150 $761 $5,750 Total production cost Required: 1. Expand the company's quality cost report by showing the costs in both years as percentages of both total production cost and total quality cost. Note: Round your percentage answers to 1 decimal place (l.e 0.1234 should be entered as 12.3). Mercury, Incorporated Quality Cost Report (in thousands) Last Year Amount Percentage of Total Production Cost Percentage of Total Quality Cost Amount This Year Percentage of Total Production Percentage of Total Quality Cost Cost Prevention costs: Machine maintenance $ 89 Training suppliers 0 Quality circles 0 Total prevention costs 89 $ 139 29 39 207 Appraisal costs: Incoming inspection 39 50 Final testing 99 109 Total appraisal costs 138 168 Internal failure costs: Rework 69 149 Scrap 59 89 Total internal failure costs 128 238 External failure costs: Warranty repairs 109 49 Customer returns 339 99 Total external failure costs 448 148 Total quality cost $ 803 $ 761 Total production cost $ 5,150 $ 5,750

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter14: Quality And Environmental Cost Management

Section: Chapter Questions

Problem 17E

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