Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

problem 19.4A 19-8 19.4A ality Arusetta Inc. produces a popular brand of air conditioner that is backed by a five-year warranty In year 1, Arusetta

image text in transcribedproblem 19.4A
image text in transcribed
19-8 19.4A ality Arusetta Inc. produces a popular brand of air conditioner that is backed by a five-year warranty In year 1, Arusetta began implementing a total quality management program that has resulted in significant changes in its cost of quality. Listed as follows is Arusetta's financial information relat- ing to sales and quality for years 1 and 2. . Sales revenue. Warranty expense Product design Scrap Process reengineering Raw materials inspections Product liability claims Rework Returns resulting from defects Supplier certification costs Preventive maintenance on equipment Final inspection costs Employee quality training Equipment breakdown repair costs Estimate of lost sales due to quality problems Year 1 Year 2 $500,000 $500,000 22.000 18,500 5,000 15,000 2,000 1.200 8,000 12,000 4,800 2.300 5,000 8.500 3,100 2,800 7.000 4,500 500 2,500 1,300 2,600 10,000 7,000 1,200 4,000 8,500 3,000 10.000 10,000 Instructions a. Prepare a cost of quality report for Arusetta covering year 1 and year 2. Your report should divide the costs into the four categories of quality costs and include total dollar amounts for each category. b. How have the total amounts of prevention and external failure costs changed over the two years? What are some possible explanations for these changes? c. At Arusetta, preventive maintenance has a direct effect on the repair costs associated with equipment breakdowns. Did the decrease in repair costs justify the increase in maintenance costs? d. Why might Arusetta's estimate of lost sales remain the same despite the adoption of the total quality management program

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting And Finance For Non Specialists

Authors: Dr Peter Atrill, Eddie McLaney

6th Edition

0273732757, 9780273732754

More Books

Students also viewed these Accounting questions

Question

What are the need and importance of training ?

Answered: 1 week ago

Question

What is job rotation ?

Answered: 1 week ago