SR Company manufactures two types of Computers, CX1 and CX2. The labour rates per hour for design is $75 per hour while for that of testing and inspection is $40 per hour

Other information on each computer is given below

Rework costs per computer

Repair costs per computer

Estimated lost sales from poor quality Percentage of units reworked in plantPercentage of units repaired at customer's siteSelling price

Units manufactured and sold

Variable costs per unit

Hours spent on design

Testing and inspection hours/unit

Required:

CX1

$500

$600

-----

6%

4%

2,000 10,000 units 1,200

5,500 0.8

CX2

$400 $450 250 units 12%

8%

1,550 5,000 units

700 1,500 0.5

calculate the ratio of each (8 marks)

you have prepared in (1) (8 marks)

1.

2. 3

Prepare one cost of quality report for each type of computer; COQ category as a percentage of revenues.

Prepare one detailed written evaluation to accompany the reports above and make necessary recommendations.

The company uses a job-order costing system and manager is not sure the treatment of rework labour cost and disposal of defective products in the accounting system. Please