Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Nelson Corporation manufactures auto parts for two leading Japanese automakers. Maudy Evans is the management accountant for one of Nelson's largest manufacturing plants. The

 

Nelson Corporation manufactures auto parts for two leading Japanese automakers. Maudy Evans is the management accountant for one of Nelson's largest manufacturing plants. The plant's General Manager, Noah Sheldon, has just returned from a meeting at corporate headquarters where quality expectations were outlined for 2019. Noah calls Maudy into his office to relay the corporate quality objective that total quality costs will not exceed 10% of total revenues by plant under any circumstances. Noah asks Maudy to provide him COQ for 2019 are as follows: Revenue Quality design engineering Engineering redesign of failed parts Rework of failed parts Warranty repairs Product inspection Quality control training for production staff Field trials Materials scrap Customer support 4,000,000 60,000 20,000 35,000 85,000 120,000 7,000 40,000 15,000 40,000 After Maudy computes the total COQ on revenues in 2019, Maudy collects information for all of the plant's possible options for improving both product quality and costs of quality. She concludes that by increasing the cost of quality control training for production staff by $17,000 per year, the company would reduce product inspection costs by 20% annually, reduce warranty repairs costs by 25% per year, and reduce rework of failed parts costs by 30% per year, as well. Required: 1. Prepare the COQ report and calculate the ratio of each costs-of-quality category (prevention, appraisal, internal failure, and external failure) to revenues for 2019. Are the total costs of quality (COQ) as a percentage of revenues currently less than 10%? (8%) 2. Show the effect of increasing the cost of quality control training for production staff by $17,000 on COQ next year. How much the COQ percentage of revenues in 2020? (assume the amount of revenues is similar with 2019) (4%) 3. Do you think the general manager, Noah Sheldon will accept Maudy's proposal to increase the cost of quality control training for production staff? Explain your reason. (3%)

Step by Step Solution

3.38 Rating (151 Votes )

There are 3 Steps involved in it

Step: 1

1 Quality design engineering Quality control training for ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Data Analysis And Decision Making

Authors: Christian Albright, Wayne Winston, Christopher Zappe

4th Edition

538476125, 978-0538476126

More Books

Students also viewed these Accounting questions