Question
In 20X3, Spring Company initiated a quality improvement program. At the end of the year, December 31st, the president noted that the defects per unit
In 20X3, Spring Company initiated a quality improvement program. At the end of the year, December 31st, the president noted that the defects per unit of product had dropped significantly compared to the prior year. The president also noted the good relationships with suppliers had improved and defective materials had declined. The new quality training program was also accepted by employees. The president also highlighted the impact of the quality improvements on profitability. To help assess the dollar impact of the quality improvements, the actual sales and the actual quality costs for 20X2 and 20X3 are as follows: All prevention costs are fixed. Assume all other quality costs variable.
Required
1 Calculate the budgeted costs for 20X3, which are determined based on adjusting 20X2 costs to the sales level of 20X3, and prepare a one-year performance report.
designate U or F if there is a variance, If there is no variance you can leave the designation blank since the variance of zero is not U or F /use the IF Function to designate U or F to earn credit.
2 Do you believe the company is moving towards a good balance among the quality cost categories? Why?
3. Estimate the additional improvement in profits of Spring Company ultimately reduces its quality costs to: 4% of sales revenues of 20X3.
Sales Return Allowances Design reviews Packaging inspection Product acceptance Quality circles Quality improvement projects Retesting Customer Complaints Rework Scrap Warranty Yield losses 20X2 8,000,000 120,000 2.000 320,000 40,000 4.000 2,000 200.000 16.000 360,000 280,000 400.000 160.000 20X3 10.000.000 140,000 20.000 300.000 28.000 40.000 100,000 160.000 14,000 320,000 240,000 440.000 100,000
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