Long-Term Performance Report

Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below.

Prevention costs:
Prototype inspection	$ 300,000
Vendor certification	600,000
Total prevention costs	$ 900,000
Appraisal costs:
Process acceptance	$ 315,000
Test labor	360,000
Total Appraisal costs	$ 675,000
Internal failure costs:
Retesting	$ 187,500
Rework	375,000
Total internal failure costs	$ 562,500
External failure costs:
Recalls	$ 261,750
Product liability	533,250
Total external failure costs	$ 795,000
Total quality costs	$2,932,500

At the zero-defect state, Nabors expects to spend $375,000 on quality engineering, $75,000 on vendor certification, and $50,000 on packaging inspection. Assume sales to be $2,600,000.

Required:

1. Prepare a long-range performance report for 20x5. Enter all answers as positive amounts. If the budget variance amount is unfavorable select "Unfavorable" in the last column of the table. Select "Favorable" if it is favorable. Round percentage answers to two decimal places, if rounding is required. For example, 5.789% would be entered as "5.79". Enter "0" as the target cost amount if there would be no cost at the zero-defect state.

Nabors Company
Long-Range Performance Report
For the Year Ended June 30, 20x5
	Actual Costs	Target Costs	Budget Variance	Favorable; or Unfavorable
Prevention costs:
	$	$	$
Total prevention costs	$	$	$
Appraisal costs:
	$	$	$
Total appraisal costs	$	$	$
Internal failure costs:
	$		$
Total internal failure costs	$		$
External failure costs:
	$		$
Total external failure costs	$		$
Total quality costs	$	$	$
Percentage of sales	%	%	%

2. Why are quality costs still present for the zero-defect state?

(Inefficiencies mean that some defects will still occur,

Prevention costs are value-added costs that are necessary to maintain the quality gains,

or Some non-value-added costs will still persist, even at the zero-defect state.)

Long-Term Performance Report Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below. Prevention costs: Prototype inspection Vendor certification Total prevention costs $ 300,000 600,000 $ 900,000 Appraisal costs: $ 315,000 360,000 $ 675,000 Process acceptance Test labor Total Appraisal costs Internal failure costs: Retesting Rework $ 187,500 375,000 $ 562,500 Total internal failure costs External failure costs: Recalls $ 261,750 533,250 Product liability Total external failure costs Total quality costs $ 795,000 $2,932,500 At the zero-defect state, Nabors expects to spend $375,000 on quality engineering, $75,000 on vendor certification, and $50,000 on packaging inspection. Assume sales to be $2,600,000. Required: 1. Prepare a long-range performance report for 20x5. Enter all answers as positive amounts. If the budget variance amount is unfavorable select "Unfavorable" in the last column of the table. Select "Favorable" if it is favorable. Round percentage answers to two decimal places, if rounding is required. For example, 5.789% would be entered as "5.79". Enter "0" as the target cost amount if there would be no cost at the zero-defect state. Nabors Company Long-Range Performance Report For the Year Ended June 30, 20x5 Actual Costs Target Costs Budget Variance favorable; or Unfavorable Prevention costs: Total prevention costs Appraisal costs: poppni 100 pppopoo Total appraisal costs Internal failure costs: Total internal failure costs $ External failure costs: Total prevention costs Appraisal costs: Total appraisal costs Internal failure costs: Dodd ad audi Total internal failure costs $ External failure costs: Total external failure costs Total quality costs Percentage of sales 2. Why are quality costs still present for the zero-defect state