Prepare a Cost of Quality report (Learning Objective S)

The CEO of Smith Snackfoods is concerned about the amount of resources currently spent on customer warranty claims. Each box of snacks is printed with the following logo: “Satisfaction guaranteed, or your money back. Since the claims are so high, she would like to evaluate what costs are being incurred to ensure the quality of the product. The following information was collected from various departments within the company:

Requirements 1. Prepare a Cost of Quality report. In addition to listing the costs by category, deter¬ mine the percentage of the total costs of quality incurred in each cost category.
2. Do any additional subjective costs appear to be missing from the report?
3. What can be learned from the report?

Transcribed Image Text:

Warranty claims....... $420,000 Cost of defective products found at the inspection point......... 94,000 Training factory personnel 26,000 Recall of Batch # 59374............. 175,000 Inspecting products when halfway through the production process...... 55,000 Cost of disposing of rejected products...... 12,000 Preventive maintenance on factory equipment....... 7,000 Production loss due to machine breakdowns..... 15,000 Inspection of raw materials 5,000