Quality Cost Report
A quality cost report reveals the magnitude of the quality costs by category, and it also shows the relative distribution of these costs. The relative distribution allows the manager to assess the significance of the various categories and to determine where the quality improvement emphasis is needed.
Example (Apply the Concepts): Suppose that Blalack Company had total sales of $10,000,000 for the year ended. Blalack’s costs of quality-related activities are as follows:
Returns and allowances (because of poor quality) | $500,000 |
Retesting | 300,000 |
Reliability engineering | 130,000 |
Rework | 200,000 |
Quality training | 20,000 |
Product acceptance | 140,000 |
Packaging inspection | 60,000 |
Warranty repair | 650,000 |
Required:
Prepare a quality cost report by completing the following table. Round percentages to two decimal places.
Quality Cost Report Blalack Company | ||||||
For the Year Ended | ||||||
Quality Costs | Percentage of Sales | |||||
Prevention costs: | ||||||
Quality Training | $ | |||||
Reliability engineering | $ | % | ||||
Appraisal costs: | ||||||
Product acceptance | $ | |||||
Packaging inspection | ||||||
Internal failure costs: | ||||||
Retesting | $ | |||||
Rework | ||||||
External failure costs: | ||||||
Returns and allowances | $ | |||||
Warranty repair | $ | % | ||||
Total quality costs | $ |
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