Harwood Company's quality cost report is to be based on the following data:

$20212022$

Depreciation of test equipment $$94,000$ $$95,000$

Audits of the effectiveness of the quality system $$54,000$ $$51,000$

Product recalls $$20,000$ $$30,000$

Test and inspection of incoming materials $$82,000$ $$85,000$

Re$-$entering data because of keying errors $$11,000$ $$16,000$

Rework labour and overhead $$48,000$ $$54,000$

Technical support provided to suppliers $$12,000$ $$10,000$

Net cost of scrap $$29,000$ $$33,000$

Lost sales due to poor quality $$74,000$ $$84,000$

Sales grew from $$950,000$ in $2021$ to $$1,000,000$ in $2022.$

Required:

Prepare a quality cost report in proper order and in good form with separate sections for each of the four types of quality costs with appropriate subtotals and an overall total for both years as well as a percentage of sales column. Carry percentage computations to one decimal place. $(15$ marks$).$

Answer to Question #$1$

Quality Cost Report

$2022\%2021\%$

Sales $1,000,000950,000$

Prevention Costs:

Appraisal Costs:

Internal Failure costs:

External failure Costs:

Total

Question # $2$: $($Marks: $10)$

The IT Corporation produces and markets two types of electronic calculators: Model $11$ and Model $12.$ The following data were gathered on activities last month:

Model $11$ Model $12$

Sales in units $5,0003,000$

Selling price per unit $$50$ $$100$

Variable production costs per unit $$10$ $$26$

Traceable fixed production costs $$100,000$ $$150,000$

Variable selling expenses per unit $$5$ $$6$

Traceable fixed selling expenses $$5,000$ $$7,500$

Allocated division administrative expenses $$50,000$ $$60,000$

Required:

$1.$ Prepare a segmented income statement in the contribution format for last month. Traceable fixed costs may be combined on a single line on the statement. $(10$ marks$)$

Answer to question # $2$:

Segmented Income Statement in Contribution Format

Model $-11$ Model $-12$

Question # $3$: $($Marks: $5)$

$($a$)$ Identify three types of responsibility centres and describe how performance is measured for each one. $(3)$

$($b$)$ What is meant by the terms margin and turnover? $(2)$