‘Maybe the emphasis we’ve placed on upgrading our quality control system will pay off in the long run, but it doesn’t seem to be helping us much right now,’ said Renee Penretti, managing director of Halogen Products. ‘I thought improved quality would give a real boost to revenue, but revenue has remained flat at £50,000,000 for the last two years.’ Halogen Products has seen its market share decline in recent years due to increased foreign competition. An intensive effort to strengthen the quality control system was initiated at the beginning of the current year in the hope that better quality would strengthen the company’s competitive position and also reduce warranty and servicing costs. Costs relating to quality and quality control over the last two years are given below:

Required
1. Prepare a quality cost report that contains data for both years. Carry percentage computations to two decimal places.
2. Prepare a bar graph showing the distribution of the various quality costs by category.
3. Prepare a written evaluation to accompany the reports you have prepared in Requirements 1 and 2 above. This evaluation should discuss the distribution of quality costs in the company, changes in this distribution that you detect have taken place over the last year, and any other information you believe would be useful to management.

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Product testing Rework labour Systems development Warranty repairs Net cost of scrap Supplies used in testing Field servicing Quality engineering Warranty replacements Inspection Product recalls Statistical process control Disposal of defective products Depreciation of testing equipment This year £800,000 1,000,000 530,000 700,000 620,000 30,000 600,000 400,000 90,000 600,000 410,000 370,000 380,000 170,000 Last year £490,000 700,000 320,000 2,100,000 430,000 20,000 900,000 280,000 300,000 380,000 1,700,000 270,000 110,000