COQ ANALYSIS AT PROJECT ESPANOL, STAR FASHION

Star Fashions has recently completed one of their several projects as below:

Project Title $$Project Espanol $/17$

Project output: Production of customized garments on order basis from Spanish buyer

Total Revenue: Rs $25,00,000$

Net Gain : Rs $12,00,000$

Project period: $7\mathrm{.}5$ Months

$-$ Input Stage: $15$ days

$-$ Process stage :$6$ months

$-$ Output stage: $1$ month

RECORD OF PROJECT EXPENSES Table $1$

Expenses head Amount Rs Remarks

FOR CURRENT PROJECT ONLY:

Quality training expenses for current project $65000$

Joint quality control workshop with another Project Americana $5000050\%$ cost sharing between two projects

Preparation of quality control manual $35000$

Training on new quality control software $25000$

Quality specialist on contract for $6\mathrm{.}5$ months$($for input and process stage only$)260000$

Chemicals purchased for lab test $25000$

Total cost of production for ordered garments $1300000$

Monitoring and Evaluation staff expenses $540000$

Additional Information:

a$.$ At the end of project a big lot of garment rejected by client is laying in store.

The value of garment at cost price is Rs $100000.$They can be however sold at local market at $50\%$ discount price

b$.$ Their quality control lab runs $8$ hours day.The allocated expense of lab is Rs $300/$hr

Current project has consumed $90$ hours of lab work for quality check of garments

c$.$ There was no record of semi$-$finished goods rejected and lying idle during the sample check, but additional dye cost of Rs $20000$ has been recorded to rectify the dyed garments during process.

d$.$ Unused fabric dye at the cost price of Rs $6800$ is laying in the store which can be used in next project

Unresolved issues in COQ costing:

a$.$Last year the organization purchased quality control software costing Rs $75,00,000.$The software can be used for multiple projects in the organization. Should the project allocate some cost of the software to this projet Espanol$$s prevention cost $?$

b$.$At the output stage, the garment packaging was outsourced to a third party from Bishalnagar. Because of the below quality packaging the packager paid an amount of Rs $9000$ penalty to the project. Should the project add this as project revenue or deduct from external failure cost or what to be done?

COQ trend

Although there is no standard set for the total COQ, project teams are required to plan the COQ with improvements, wherever possible. The COQ has varied between $15$ to $20\%$ of the revenue among different projects. Management has consistently suggested to improve in this regard.

Project Americana:

One of the projects in Star $$ Project Americana has also recently delivered their output. Americana team has started reviewing the COQ. They have following finalised records in COQ:

Project revenue REVENUE Rs $35,00,000$

Table II

Expense Amount Rs Remarks

Prevention $300000$

Monitoring $290000$

Internal Failure $75000$

External Failure $35000$

TOTAL COQ $700000$

Required:

a$.$ Complete the COQ Table for Project Espanol making appropriate adjustments in Table $1$ and also addressing two unresolved issues given above.

b$.$ Observe, compare and give your opinion about quality control in Project Espanol vs Project Americana.

c$.$ Within a month, Espanol team is going to undertake another revenue project $$ Project FTG with an expected revenue of Nrs $30,00,000.$How will you plan the COQ components.Prepare the COQ table for next project as per Americana format in Table II