Preparing a cost-of-quality report The following information shows last year’s quality-related costs for the Madrigal Company: ITEM AMOUNT Quality engineering $600,000 Warranty claims 2,814,000 Product liability lawsuits 5,400,000 Research of customer needs 90,000 Maintenance of test equipment 420,000 Returned products 1,440,000 Rework costs 1,440,000 Quality training 150,000 Process control monitoring 1,200,000 Inspection of and testing of incoming materials 480,000 Repair costs in the field 1,020,000 Statistical process control 300,000 Product recalls 2,400,000 Waste 840,000 Net cost of scrap 762,000 Product quality audits 570,000 Downtime due to defects 150,000 Supplier certification 108,000 Total sales for the year were $120,000,000. Required (a) Prepare a cost-of-quality report grouping costs into prevention, appraisal, internal failure, and external failure. Also show costs as a percent of sales. (b) Interpret the data and make recommendations to Madrigal’s management.

Preparing a cost-of-quality report The following information shows last year’s quality-related costs for the Madrigal Company: ITEM AMOUNT Quality engineering $600,000 Warranty claims 2,814,000...

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Preparing a cost-of-quality report The following information shows last year’s quality-related costs for the Madrigal Company:

ITEM	AMOUNT
Quality engineering	$600,000
Warranty claims	2,814,000
Product liability lawsuits	5,400,000
Research of customer needs	90,000
Maintenance of test equipment	420,000
Returned products	1,440,000
Rework costs	1,440,000
Quality training	150,000
Process control monitoring	1,200,000
Inspection of and testing of incoming materials	480,000
Repair costs in the field	1,020,000
Statistical process control	300,000
Product recalls	2,400,000
Waste	840,000
Net cost of scrap	762,000
Product quality audits	570,000
Downtime due to defects	150,000
Supplier certification	108,000

Total sales for the year were $120,000,000.

Required

(a) Prepare a cost-of-quality report grouping costs into prevention, appraisal, internal failure, and external failure. Also show costs as a percent of sales.

(b) Interpret the data and make recommendations to Madrigal’s management.

Answered Same Day Dec 24, 2021

Solution

David answered on Dec 24 2021

123 Votes

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Preparing a cost-of-quality report The following information shows last year’s quality-related costs for the Madrigal Company: ITEM AMOUNT Quality engineering $600,000 Warranty claims 2,814,000...

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