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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