KKR Enterprise is a major NZ motorbike manufacturer Over the last decade, motorbike manufacturers from the subcontinent have been able to price their motorbikes below those of the KKR Enterprise, but the company has retained its market share due to the poor quality of the imported motorbikes Recently, however, the quality of the imported bikes has improved, and KKR Enterprise has had to cut prices to maintain market share The managing director, Rachel Dakin, is concerned about the viability of the business at these lower prices and asks the head of the accounting team, Natalie Heymar, to investigate the problem Over the next six months Natalie identifies the following costs, which she thinks may be related to quality ( she's not sure though ) Cost of repairs under warranty, $9,375 Cost of replacement bikes provided under warranty, $19,500 Cost of rewelding faulty joints discovered during processing, $59,750 Engineering costs to correct production line quality problems, $42,500 General engineering costs, $97,500 Bike showroom running expenses, $41,250 Inspection of bikes put into finished goods warehouse, $45,000 Laboratory testing of bikes and components, $27,500 Lost contribution on machine downtime during correction of production line quality problems, $56,250 Operating an Xray machine to detect faulty welds, $41,250 Quality inspection in the goods receiving area, $38,750 Quality inspections during processing, $26,250 Sales commissions on faulty bikes returned by customers, $5,000 Sales commissions paid to sacked employees, $16,250 Contribution margin forgone on bikes returned by customers, $5,625 Contribution margin forgone on lost future bike sales, $19,750 Cost of bikes returned by customers and scrapped $16,250 Rework on defective wheels, $21,250 Cost of faulty bikes that are scrapped after finished goods inspection, $27,500 Cost of faulty components that are scrapped, $9,250 Cost of quality training programs, $11,000 During this period, total manufacturing costs were $3,122,000 QUESTIONS do a cost of quality report, showing each category of quality costs that provides information to the management in an informative way Comment on the relative proportions of each of the four categories of quality costs Your answer should include your analysis as well as your evaluation of the current situation

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 29, 2024

KKR Enterprise is a major NZ motorbike manufacturer. Over the last decade, motorbike manufacturers from the subcontinent have been able to price their motorbikes below

KKR Enterprise is a major NZ motorbike manufacturer. Over the last decade, motorbike manufacturers from the subcontinent have been able to price their motorbikes below those of the KKR Enterprise, but the company has retained its market share due to the poor quality of the imported motorbikes. Recently, however, the quality of the imported bikes has improved, and KKR Enterprise has had to cut prices to maintain market share. The managing director, Rachel Dakin, is concerned about the viability of the business at these lower prices and asks the head of the accounting team, Natalie Heymar, to investigate the problem.

Over the next six months Natalie identifies the following costs, which she thinks may be related to quality (she's not sure though):

Cost of repairs under warranty, $9,375.
Cost of replacement bikes provided under warranty, $19,500.
Cost of rewelding faulty joints discovered during processing, $59,750.
Engineering costs to correct production line quality problems, $42,500.
General engineering costs, $97,500.
Bike showroom running expenses, $41,250.
Inspection of bikes put into finished goods warehouse, $45,000.
Laboratory testing of bikes and components, $27,500.
Lost contribution on machine downtime during correction of production line quality problems, $56,250.
Operating an Xray machine to detect faulty welds, $41,250.
Quality inspection in the goods receiving area, $38,750.
Quality inspections during processing, $26,250.
Sales commissions on faulty bikes returned by customers, $5,000.
Sales commissions paid to sacked employees, $16,250.
Contribution margin forgone on bikes returned by customers, $5,625.
Contribution margin forgone on lost future bike sales, $19,750.
Cost of bikes returned by customers and scrapped $16,250.
Rework on defective wheels, $21,250.
Cost of faulty bikes that are scrapped after finished goods inspection, $27,500.
Cost of faulty components that are scrapped, $9,250.
Cost of quality training programs, $11,000.

During this period, total manufacturing costs were $3,122,000.

QUESTIONS

do a cost of quality report, showing each category of quality costs that provides information to the management in an informative way.
Comment on the relative proportions of each of the four categories of quality costs. Your answer should include your analysis as well as your evaluation of the current situation.