=+Dave Evans, the plant manager of Auscell, is eligible for a bonus if the total costs of quality as a percentage of revenues are less than 10%, the percentage of customer complaints is less than 4% and the on-time delivery rate exceeds 92%. Dave is unhappy about the customer complaints of 5% because, when preparing her report, Lindsey Williams actually surveyed customers regarding customer satisfaction. Dave expected Lindsey to be less proactive and to wait for customers to complain. Dave’s concern with Lindsey’s approach is that it introduces subjectivity into the results and also fails to capture the seriousness of customers’ concerns: ‘When you wait for a customer to complain, you know he is complaining because it is something important. When you do customer surveys, customers mention whatever is on their mind, even if it is not terribly important.’

John Roche, the management accountant, asks Lindsey Williams to see him. He tells her about Dave’s concerns. ‘I think Dave has a point. See what you can do.’ Lindsey is confident that the customer complaints are genuine and that customers are concerned about quality and service. She believes it is important for Auscell to be proactive and obtain systematic and timely customer feedback, and then to use this information to make improvements. She is also well aware that Auscell has not done customer surveys in the past, and that Dave Evans would probably be eligible for the bonus if she had not surveyed customers. She is confused about how to handle John Roche’s request.

Required 1 Calculate the ratio of each COQ category (prevention, appraisal, internal failure and external failure) to revenues in 2014.

Are the total costs of quality as a percentage of revenues less than 10%?