Scott Companys quality report for October 2000 showed the following information: Total defective units 2,000 Number of
Question:
Scott Company’s quality report for October 2000 showed the following information:
Total defective units 2,000 Number of units reworked 1,400 Number of customer units returned 650 Profit for a good unit $38 Profit for a defective unit $22 Cost to rework a defective unit $7 Cost to process a returned unit $10 Total prevention cost $27,000 Total appraisal cost $16,000 Litigation related to product failure $70,000 The company also estimated an opportunity cost of lost customers of $50,000 while the litigation was being settled.
Required:
Compute the following:
a. Profit lost by selling unreworked defects
b. Total rework cost
c. Cost of processing customer returns
d. Total failure cost
e. Total quality cost
Step by Step Answer:
Cost Accounting Traditions And Innovations
ISBN: 9780324180909
5th Edition
Authors: Jesse T. Barfield, Cecily A. Raiborn, Michael R. Kinney