Shibata Lawns Inc. manufactures riding lawnmowers. Their customers are home improvement and hardware stores who sell the lawnmowers to home owners. Two of their popular lawnmowers are the 'Bushhog' and the 'Snapper'. The home user living on a large acreage usually buys these mowers because of their low maintenance cost and high safety rating.

The industrial engineer that has overseen the design and implementation of the manufacturing of these two products would like a quality report on these two products.

You have gathered the following information for the current year:

Bushhog Snapper

Units manufactured and sold 3100 6,250

Selling price per unit $1,656 $2,208

Variable costs per unit $768 $995

Hours spent on quality design 500 2,800

Testing and inspection hours per unit 0.75 1

Percentage of manufactured units reworked in the plant 10% 3%

Rework costs per mower $420 $250

Percentage of units repaired at customer site 7% 2%

Warranty repair costs per mower $460 $410

Estimated lost sales from poor quality (units) 140

Labour rates:

Design - $75 per hour

Testing - $40 per hour

Required:

a. Make a cost of the quality report for Shibata Lawns. The report should list all cost items categorized by type of quality cost, including percentages in relation to revenues for each product and category

b. Explain the results to the industrial engineer of Shibata Lawns Inc. Provide a recommendation for quality cost improvement