QUESTION F: Financial analysis of quality[1]

The Hartono Corporation manufactures and sells industrial grinders. The following table presents financial information pertaining to quality in 2019 and 2020 (in thousands)

20192020Classification

Production line inspection11085___________

Scrap - from machine breakdown250175___________

Design engineering of production line100240___________

Cost of returned goods60145___________

Product-testing equipment costs5050___________

Customer support4030___________

Rework costs160135___________

Product liability claims200100___________

Incoming materials inspection2040___________

Breakdown repairs9040___________

Product-testing labour22075___________

Quality training45120___________

Warranty repair300200___________

Supplier evaluations2030___________

Required

1.Classify the cost items in the table into prevention, appraisal, internal failure, or external failure categories. (7 marks)

2.Prepare a Cost of Quality report using the format on the next page. Sales for 2019 were $10,000 (000) and $12,500 (000) for 2020. (4 marks)

Comment on the trends in costs of quality between 2019 and 2020. (2 marks)

Hartano Corporation- Cost of Quality Report- % of % of 2020