Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Trade - Offs Among Quality Cost Categories, Total Quality Control, Gainsharing Javier Company has sales of $ 8 million and quality costs of $ 1

image text in transcribed
Trade-Offs Among Quality Cost Categories, Total Quality Control, Gainsharing
Javier Company has sales of $8 million and quality costs of $1,600,000. The company is embarking on a major quality improvement program. During the next three years, Javier intends to attack failure costs by increasing its appraisal and prevention costs. The "right" prevention activities will be selected, and appraisal costs will be reduced according to the results achieved. For the coming year, management is considering six specific activities: quality training, process control, product inspection, supplier evaluation, prototype testing, and redesign of two major products. To encourage managers to focus on reducing non-value-added quality costs and select the right activities, a bonus pool is established relating to reduction of quality costs. The bonus pool is equal to 10 percent of the total reduction in quality costs.
Current quality costs and the costs of these six activities are given in the following table. Each activity is added sequentially so that its effect on the cost categories can be assessed. For example, after quality training is added, the control costs increase to $320,000, and the failure costs drop to $1,040,000. Even though the activities are presented sequentially, they are totally independent of each other. Thus, only beneficial activities need be selected.
Control Costs Failure Costs
Current quality costs $160,000 $1,440,000
Quality training 320,0001,040,000
Process control 520,000720,000
Product inspection 600,000656,000
Supplier evaluation 720,000200,000
Prototype testing 960,000120,000
Engineering redesign 1,000,00040,000
1. Identify the control activities that should be implemented.
2. Given the activities selected in Requirement 1, calculate the following:
a. The reduction in total quality costs.
b. The percentage distribution for control and failure costs. Round your answers to the nearest whole percentage value (for example, 6% would be entered as "6").
c. The amount for this year's bonus pool. Trade-Offs Among Quality Cost Categories, Total Quality Control, Gainsharing
Javier Company has sales of $8 million and quality costs of $1,600,000. The company is embarking on a major quality improvement program. During
the next three years, Javier intends to attack failure costs by increasing its appraisal and prevention costs. The "right" prevention activities will be
selected, and appraisal costs will be reduced according to the results achieved. For the coming year, management is considering six specific activities:
quality training, process control, product inspection, supplier evaluation, prototype testing, and redesign of two major products. To encourage
managers to focus on reducing non-value-added quality costs and select the right activities, a bonus pool is established relating to reduction of
quality costs. The bonus pool is equal to 10 percent of the total reduction in quality costs.
Current quality costs and the costs of these six activities are given in the following table. Each activity is added sequentially so that its effect on the
cost categories can be assessed. For example, after quality training is added, the control costs increase to $320,000, and the failure costs drop to
$1,040,000. Even though the activities are presented sequentially, they are totally independent of each other. Thus, only beneficial activities need be
selected.
Required: Redutred:
# IV
iCamal'cost
s
Fallutrel torsts
Identify the control activities that should be implemented.
Process control, product inspection, and prototype testing
Process control, supplier evaluation, and engineering redesign
Quality training, process control, and engineering redesign
Quality training, process control, and prototype testing
Quality training, process control, product inspection, and engineering redesign
Quality training, process control, supplier evaluation, and engineering redesign
Quality training, product inspection, and prototype testing
activity is selected only if it increases the bonus pool.
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

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

Step: 3

blur-text-image

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

College Accounting A Contemporary Approach

Authors: David Haddock, John Price, Michael Farina

4th edition

978-1259995057, 1259995054, 978-0077503987, 77503988, 978-0077639730

More Books

Students also viewed these Accounting questions