eBook Pareto Chart and cost of Quality Report for a Manufacturing Company The president of Mission Inc. has been concerned about the growth in costs over the last several years. The president asked the controller to perform an activity analysis to gain a better insight into these costs. The result of the activity analysis is summarized as follows: Activities Activity Cost $14,760 12,300 Correcting invoice errors Disposing of incoming materials with poor quality Disposing of scrap Expediting late production 36,900 31,980 Final inspection 22,140 4,920 24,600 Inspecting incoming materials Inspecting work in process Preventive machine maintenance Producing product Responding to customer quality complaints 17,220 68,880 12,300 Total $246,000 The production process is complicated by quality problems, requiring the production manager to expedite production and dispose of scrap. Required: 1. On paper or in a spreadsheet program, prepare a Pareto chart for each of the activities listed above. Answer the following: What type of chart is a Pareto chart? Check My Work Save and Exit Submit Assignment for Grading All work saved eBook 2. Classify the activities into prevention, appraisal, internal failure, external failure, and not costs of quality (producing product). Classify the activities into value-added and non- value added activities. Cost of Quality Classification Value Added/ Non-Value Added Classification Activity Activity Cost Correcting invoice errors $14,760 Disposing of incoming materials with poor quality 12,300 36,900 Disposing of scrap Expediting late production 31,980 Final inspection 22,140 Inspecting incoming materials 4,920 24,600 Inspecting work in process Preventive machine maintenance 17,220 Producing product 68,880 12,300 Responding to customer quality complaints Total $246,000 3. Use the activity cost information to determine the percentages of total costs that are prevention, appraisal, internal failure, external failure, and not costs of quality (producing product). Quality Cost Percent of Total Classification Activity Cost Department Cost Check My Work eBook 3. Use the activity cost information to determine the percentages of total costs that are prevention, appraisal, internal failure, external failure, and not costs of quality (producing product). Quality Cost Classification Percent of Total Department Cost Activity Cost Prevention % Appraisal % Internal failure % External failure % Not costs of quality 9 Total % 4. Determine the percentages of total department costs that are value-added and non-value-added. Percent of Total Activity Cost Department Cost Value-added Non-value-added Tota! 5. The department has % of its total costs as non-value-added. Internal failure costs represent opportunity for cost savings. External failure costs represent % of the total department costs. % of the total costs. This means there is significant Check My Work
