The Duncan Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its primary customers are aviation manufacturers and maintenance companies. The following table contains financial information pertaining to cost of quality (COQ) in 2010 and 2011 in thousands of dollars:

Required

1. Classify the cost items in the table into cost-of-quality (COQ) categories.

2. Calculate the ratio of each COQ category to revenues in each of the two years.

3. Comment on the results.

4. In addition to the financial measures listed in the table, what nonfinancial measures might Duncan Materials Company monitor in its effort to achieve overall improvements in quality?

5. Are financial or nonfinancial quality measures likely of more use to: (a) managers? (b) operating personnel?Why?

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2010 2011 $15,000 S18,750 Sales Materials inspection 300 60 Production inspection 160 125 Finished product inspection 225 70 Preventive equipment maintenance 20 60 Scrap (net) 500 300 Warranty repairs 700 400 Product design engineering 270 150 Vendor certification 10 60 Direct costs of returned goods 250 80 Training of factory workers 40 140 Product testing-equipment maintenance 60 60 Product testing labor 210 90 Field repairs 70 30 Rework before shipment 240 180 Product-liability settlement 360 60 Emergency repair and maintenance 190 60