Quality Cost Report

Whitley Company had total sales of $1,000,000 for the year ending 20X1. The costs of quality are given below.

Returns/allowances		$50,000
Design changes		60,000
Prototype inspection		13,000
Downtime		40,000
Quality circles		2,000
Packaging inspection		14,000
Field testing		6,000
Complaint adjustment		65,000

Required:

1. Prepare a quality cost report, classifying costs by category and expressing each category as a percentage of sales. Round your percentages to two decimal places.

	Whitley Company
	Quality Cost Report
	For the Year Ended 20X1
	Quality Costs		Percentage of sales
Prevention costs:
Quality circles	$
Prototype inspection			%
Appraisal costs:
Field testing	$
Packaging inspection
Internal failure costs:
Design changes	$
Downtime
External failure costs:
Returns/allowances	$
Complaint adjustment
Total quality costs		$	%

What message does the cost report provide? (select the letter adjacent to your response)

The report indicates that the quality costs are higher than the 2 to 4% of sales that prevails for companies with good quality performance.

The report indicates that the quality costs are within the desired level of sales that prevails for companies with good quality performance.

The report indicates that the quality cost is equal to the desired level of sales that prevails for companies with good quality performance