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Required Information [The following information applies to the questions displayed below.] Acme Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its

image text in transcribedimage text in transcribed Required Information [The following information applies to the questions displayed below.] Acme Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its primary customers are aviation manufacturers and maintenance companies. The following table contains financial Information pertaining to cost of quality (COQ) in 2019 and 2020 (in thousands of dollars): 2019 2020 Sales $16,500 $20,500 Preventive equipment maintenance Materials inspection In-process (production) inspection Finished product inspection Scrap (net) Warranty repairs 350 65 165 130 300 75 25 65 550 350 750 500 Product design engineering 155 320 Vendor certification 15 65 Direct costs of returned goods 325 85 Training of factory workers 45 145 Product testing-equipment maintenance 65 65 Product testing labor 260 95 Field repairs 75 45 Rework before shipment 290 205 Product-liability settlement 410 65 Emergency repair and maintenance 250 80 Required: 1. Classify the cost items in the table into cost-of-quality (COQ) categories. 2. Calculate the ratio of each COQ category to revenues in each of the 2 years. 2019 2020 Amount % of Sales Amount % of Sales S 16,500 $ 20,500 Sales Cost of quality: Prevention costs: Preventive equipment maintenance $ 25 $ 65 Vendor certification 15 65 Training of factory workers 45 145 Product design engineering 155 320 Total prevention costs Appraisal costs: $ 240 1.45% $ 595 2.90 % $ 65 130 75 65 95 $ 1,140 6.91 % $ 430 2.10% Materials inspection In-process (production) inspection Finished product inspection Product testing-equipment maintenance Product testing-labor $ 350 165 300 65 260 Total appraisal costs Internal failure costs: Scrap (net) Rework (before shipment) Emergency repairs & maintenance $ 550 290 250 Total internal failure costs External failure costs: Warranty repairs S 750 Direct costs of returned goods 325 Field repairs 75 Product-liability settlement 410 $ 350 205 80 $ 1,090 6.61% $ 635 3.10 % $ 500 85 45 65 Total external failure costs $ 1,560 9.45 % $ 695 3.39 % Total cost of quality (COQ) $ 4,030 24.42% $ 2,355 11.49 %

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