Problem 12-7 (Algo) The following table lists all costs of quality incurred by Sam’s Surf Shop last year. Annual inspection costs $ 266,000 Annual cost of scrap materials 477,000 Annual rework cost 225,679 Annual cost of quality training 647,000 Annual warranty cost 1,927,000 Annual testing cost 673,000   What was Sam’s appraisal cost for quality last year?

Vernon Bike Company makes the frames used to build its bicycles. During Year 2, Vernon made 22,000 frames; the costs incurred follow. Unit - level materials costs (22,000 units \times $48) $ 1,056, 000 Unit - level labor costs (22,000 units \times $53) 1, 166,000 Unit - level overhead costs (22,000 \times $ 12) 264,000 Depreciation on manufacturing equipment 99,000 Bike frame production supervisor's salary 75, 800 Inventory holding costs 289,000 Allocated portion of facility - level costs 580,000 Total costs $ 3,529,800 Vernon has an opportunity to purchase frames for $110 each. Additional Information The manufacturing equipment, which originally cost $500,000, has a book value of $450,000, a remaining useful life of four years, and a zero salvage value. If the equipment is not used to produce bicycle frames, it can be leased for $78, 000 per year. Vernon has the opportunity to purchase for $960,000 new manufacturing equipment that will have an expected useful life of four years and a…

Cost of quality Elijah Electronics makes wireless headphone sets. The firm produced 76,500 wireless headphone sets during its first year of operation. At year-end, it had no inventory of finished goods. Elijah sold 71,910 units through regular market channels, but 765 of the units produced were so defective that they had to be sold as scrap. The remaining units were reworked and sold as seconds. For the year, the firm spent $408,000 on prevention costs and $204,000 on quality appraisal. There were no customer returns. An income statement for the year follows. Sales Regular channel Seconds Scrap Cost of goods sold Original production costs Rework costs Quality prevention and appraisal Gross margin Selling and administrative expenses (all fixed) Profit before income taxes $14,382,000 363,375 26,775 $14,772,150 $4,889,880 107,100 612,000 $5,608,980 $9,163,170 2,499,000 $6,664,170 a. Compute the total pre-tax profit lost by the company in its first year of operations by selling defective…

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Prevention costs Appraisal costs Internal failure costs: External failure costs Last Year $ 389, 100 $ 467, 300 $ 837,400 $1,100,000 This Year $ 669,500 $ 545,000 $ 465,000 $ 612,000 Required: 1. Calculate the total cost of quality last year and this year. 2. For last year, calculate the cost in each of the four categories as a percent of the total cost of quality. 3. For this year, calculate the cost in each of the four categories as a percent of the total cost of quality. 4-a. Calculate the change in total cost of quality over the two-year period. 4-b. Is performance trending in a favorable or unfavorable direction? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4A Required 48 Calculate the change in total cost of quality over the two-year period. Prevention and appraisal activities Internal and external failure costs The total cost of quality Increased Decreased 502,300 Decreased < Prev 4 of 5 ⠀⠀ Next

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Nonvalue-Added Costs Lemmons Inc. has the following two activities: (1) Retesting reworked products, cost: $446,000. The retesting cost of the most efficient competitor is $225,000. (2) Welding subassemblies, cost: $1,080,000 (67,500 welding hours). A benchmarking study reveals that the most efficient level for Lemmons would use 54,000 welding hours and entail a cost of $864,000. Required: Determine the nonvalue-added cost of each activity. Nonvalue-added cost: Retesting $ 221,000 X Welding $216,000 ✓