Quantex makes high-quality steel for specialized applications like ball bearings, camshafts, and tank treads. Most of the armor of Desert Storm rode to victory on Quantex steel.

The company keeps almost no inventory—a lesson learned from the days when steel produced for the oil patch rusted on its lots. At the company's Fort Smith, Arkansas, facility, every batch of steel is a custom-recipe, sold before it's even cooked in the pot. Widen cool, it is bar-coded with the owner's name and address.

Mill workers get a bonus based on the amount of steel shipped, minus any defective steel that comes back. That gives them an incentive to make defect-free steel using as few people as possible. Quantex takes about 1.9 man-hours to produce a ton ofsteel, vs. aboutfour hoursfor a big integrated mill. Other mini-mill companies are about as efficient as Quantex, but their commodity-grade reinforcing bars sell for roughly $300 a ton, while Quantex specialty steel fetches around $500.

a. Discuss the applicability of use to Quantex of a traditional process costing system, a standard process costing system, and a hybrid costing system.

b. What two reasons can be given for such a wide selling price differential for tonnage between Quantex and the other mini-mills? Which of these do you think has more influence on the high selling price and why?

c. Why is quality an extremely important issue for steel producers?LO1