BF180: Costs and Budgeting (BCF)

Capstone Project Part 2

Project Description:

You have been hired as a Cost Accountant by Sundial, Inc., which produces sunglasses. Your duties include developing cost standards for materials and labor, designing and implementing cost accounting systems, defining various product and operational costs, analyzing production costs and recommending changes. When the trial period is over, you will have a performance review to demonstrate the completed tasks and gained knowledge.

You have read the Cost of Quality Report of Sundial, Inc. and discovered that quality costs constitute 4.2% of sales. The amount is enormous, and your boss asks you to develop a set of measures to reduce it.

Sundial, Inc.
Cost of Quality Report
For the Year
	Cost of Quality	Percent of Sales ($32,000,000)
Prevention costs	$160,000	0.5%
Appraisal costs	$192,000	0.6%
Internal failure costs	$576,000	2.8%
External failure costs	$416,000	1.3%
Total cost of quality	$1,344,000	4.2%

 

Read the following articles and answer the three questions below:

• "Costs of quality or quality costs" https://www.accountingformanagement.org/costs-of-quality-or-quality-costs/
• "11 Ways to Reduce Cost of Quality with Integrated MES and EQMS" https://www.ibaset.com/11-ways-to-reduce-cost-of-quality-with-integrated-mes-and-eqms/

 

1. How would you define the Cost of Quality? Identify the types of quality costs.
2. Provide at least three examples of each of the types of Quality Costs that Sundial, Inc. might have encountered.
3. Develop a set of measures that Sundial, Inc. has to undertake in order to reduce the cost of quality. Provide at least five measures and explain in simple words how their implementation would impact the costs of quality and Sundial's performance.

Cost of QualityAppraisalPreventionInternalExternalCostCostfailure CostFailure CostCost of Good QualityCost of Poor Quality