Industrial Technologies, Inc. (ITI), produces two compression machines that are popular with manufacturers of plastics: no. 165
Question:
Required:
1. Classify the preceding costs as prevention, appraisal, internal failure, or external failure.
2. Using the classifications in requirement (1), compute ITIs quality costs for machine no. 165 in dollars and as a percentage of sales revenues. Also calculate prevention, appraisal, internal failure, and external failure costs as a percentage of total quality costs.
3. Repeat requirement (2) for machine no. 172.
4. Comment on your findings, noting whether the company is investing its quality expenditures differently for the two machines.
5. Quality costs can be classified as observable or hidden. What are hidden quality costs, and how do these costs differ from observablecosts?
Step by Step Answer:
Managerial Accounting Creating Value in a Dynamic Business Environment
ISBN: 978-0078025662
10th edition
Authors: Ronald Hilton, David Platt