Costs of quality, quality improvement. iCover produces bags for carrying laptop computers. iCover sells 1,000,000 units each year at a price of $20 per unit and a contribution margin of 40%. To respond to customer complaints, iCover's mangers want to modify the production processes to pro- duce higher-quality products. The current costs of quality are as follows: Prevention costs $400,000 Appraisal costs $150,000 Internal failure costs Rework $325,000 Scrap $ 75,000 External failure costs Product repair costs $400,000 Lost sales from customer returns $650,000 The management accountant has forecast the following additional costs to modify the production process. Design changes Process engineering $125,000 $210,000

Costs of quality, quality improvement. iCover produces bags for carrying laptop computers. iCover sells 1,000,000 units each year at a price of $20 per unit and a contribution margin of 40%. To respond to customer complaints, iCover's mangers want to modify the production processes to pro- duce higher-quality products. The current costs of quality are as follows: Prevention costs $400,000 Appraisal costs $150,000 Internal failure costs Rework $325,000 Scrap $ 75,000 External failure costs Product repair costs $400,000 Lost sales from customer returns $650,000 The management accountant has forecast the following additional costs to modify the production process. Design changes Process engineering $125,000 $210,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter12: Activity-based Management

Section: Chapter Questions

Problem 28P: Bienestar, Inc., has two plants that manufacture a line of wheelchairs. One is located in Kansas...

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