(Question and Answer): 1.Quality Cost Report Whitley Company had total sales of $1,000,000 for the year ending 20X1. The costs of quality are given below. Returns

1.Quality Cost Report Whitley Company had total sales of $1,000,000 for the year ending 20X1. The costs of quality are given below. Returns/allowances $50,000 Design changes 60,000 Prototype inspection 13,000 Downtime 40,000 Quality circles 2,000 Packaging inspection 14,000 Field testing 6,000 Complaint adjustment 65,000 Required: 1. Prepare a quality cost report, classifying costs by category and expressing each category as a percentage of sales. Round your percentages to two decimal places. Whitley Company Quality Cost Report For the Year Ended 20X1 Quality Costs Percentage of sales Prevention costs: Quality circles $ Prototype inspection % Appraisal costs: Field testing $ Packaging inspection Internal failure costs: Design changes $ Downtime External failure costs: Returns/allowances $ Complaint adjustment Total quality costs $ % What message does the cost report provide? (select the letter adjacent to your response) a.The report indicates that the quality costs are higher than the 2 to 4% of sales that prevails for companies with good quality performance. b.The report indicates that the quality costs are within the desired level of sales that prevails for companies with good quality performance. c.The report indicates that the quality cost is equal to the desired level of sales that prevails for companies with good quality performance. a 2. Select the letter adjacent to the appropriate bar graph and pie chart which illustrate each category’s contribution to total quality costs. a. b. c. d. The correct answer is: a The graphs reveal that failure costs are approximately % of the total quality costs, suggesting that Whitley needs to invest more in control activities to drive down failure costs.

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(Question and Answer): 1.Quality Cost Report Whitley Company had total sales of $1,000,000 for the year ending 20X1. The costs of quality are given below. Returns
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Quality Cost Report

For the year ended 20X1

Sales $ 1,000,000 100 %
Quality Costs Amount Percentage of Sales
Prevention Costs
Quality Circles $ 2,000
Prototype Inspection $ 13,000
Total Prevention Costs $ 15,000 1.50 %
Appraisal Costs
Field Testing $ 6,000
Packaging Inspection $ 14,000
Total Appraisal Costs $ 20,000 2.00 %
Internal Failure Costs
Design Changes $ 60,000
Downtime $ 40,000
Total Internal Failure Costs $ 100,000 10.00 %
External Failure Costs
Returns / Allowances $ 50,000
Complaint Adjustments $ 65,000
Total External Failure Costs $ 115,000 11.50 %
Total Quality Costs $ 250,000 25 %

a. The report indicates that the quality costs are higher than the 2 – 4% of sales that prevails for companies with good quality performance.

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