Question
Nova Craft Canoe is an Ontario-based company located near London, Ontario. The company specializes in designing, manufacturing and selling fiberglass canoes. Lately, the company started
Nova Craft Canoe is an Ontario-based company located near London, Ontario. The company specializes in designing, manufacturing and selling fiberglass canoes. Lately, the company started using more advanced composite materials including aramid, basalt/Innegra, and carbon fiber. The following quality related costs are incurred in fiscal year 2022:
| Damaged work-in-process inventory disposal | $ 260,000 |
| Downtime, due to quality issues | $ 240,000 |
| Filed test of new cutting machine | $ 120,000 |
| Support of a customer complaint department | $ 174,000 |
| Product liability insurance | $ 180,000 |
| Employee training | $ 120,000 |
| Rework costs (labour and overhead) | $ 80,000 |
| Supplier certification | $ 125,000 |
| Technical support provided to suppliers | $ 45,000 |
| Equipment inspection | $ 160,000 |
| Test and inspection of raw materials | $ 92,000 |
| Warranty repairs | $ 87,000 |
Required: 1. Based on the quality-related costs, prepare a cost-of-quality (COQ) report for 2022. Assume sales for the year $12,730,000. (18 marks) 2. What conclusions can be made from this report? (2 marks)
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Accounting Principles Managerial Concepts
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow
7th Canadian Edition
1119310296, 978-1119310297
