ACC502: operations management accounting

Question

Bath Products Ltd manufactures a variety of bath and beauty products for specialty stores. The company has recently introduced the concept of identifying cost of quality and has identified the following costs for the month: Rework time $12,000 Cost of defective products that cannot be reused $14,000 Laboratory testing for safety $18,000 Training of quality control supervisors $21,000 Customer complaints $11,600 Inspection of purchased ingredients $7,800 Product liability $1000 Sales Revenue for the month was $100,000.

Required:

1. Prepare cost of quality report for Bath Products Ltd. The report should include the following information:

- Classification of the above costs as internal failure, external failure, appraisal and prevention costs. (3 marks)

- Calculation of each cost with respect to percentage of sales. (3 marks)

- Calculation of each cost with respect to percentage of total quality costs. (3 marks)

2. Prepare report for the management of Bath Products Ltd, commenting on the analysis in requirement (1) and providing suggestion for improvement. (3 marks)