PROBLEM 2B-3 Quality Cost Report [L09, L010] Yedder Enterprises was a pioneer in designing and producing precision surgical lasers. Yedder's product was brilliantly designed, but the manufacturing process was neglected by management with a consequence that quality problems have been chronic. When customers complained about defective units, Yedder would simply send out a repairperson or replace the defective unit with a new one. Recently, several competitors came out with similar products without Yedder's quality problems, and as a consequence Yedder's sales have declined. To rescue the situation, Yedder embarked on an intensive campaign to strengthen its quality control at the beginning of the current year. These efforts met with some success-the downward slide in sales was reversed, and sales grew from $95 million last year to $100 million this year. To help monitor the company's progress, costs relating to quality and quality control were compiled for last year and for the first full year of the quality campaign this year. The costs, which do not include the lost sales due to a reputation for poor quality, appear below: Costs (in thousands) Last Year This Year Product recalls... Systems development Inspection.... Net cost of scrap Supplies used in testing $3,500 $600 $120 $680 $1,700 $2,770 $800 $1,300 $30 $40 Warranty repairs... $3,300 $2,800 Rework labor $1,400 $1,600 Statistical process control $0 $270 Customer returns of defective goods $3,200 $200 Cost of testing equipment. $270 $390 Quality engineering.... $1,080 $1,650 Downtime due to quality problems. $600 $1,100 Required: 1. Prepare a quality cost report for both this year and last year. Carry percentage computations to two decimal places. 2. Prepare a bar graph showing the distribution of the various quality costs by category. 3. Prepare a written evaluation to accompany the reports you have prepared in (1) and (2) above. This evaluation should discuss the distribution of quality costs in the company, changes in the distribution over the last year, and any other information you believe would be useful to management.