Costs of quality (CMA, adapted) Costen, Inc., produces cell phone equipment. Jessica Tolmy, Costens president, decided to

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Costs of quality (CMA, adapted) Costen, Inc., produces cell phone equipment. Jessica Tolmy, Costen’s president, decided to devote more resources to the improvement of product quality after learning that her company had been ranked fourth in product quality in a 2006 survey of cell phone users. Costen’s quality-improvement program has now been in operation for two years, and the cost report shown here has recently been issued.

Semi-annual COQ report, Costen, Inc. (In thousands) 6/30/2009 12/31/2009 6/30/2010 12/31/2010 Prevention costs $ 440 $ 3

1. For each period, calculate the ratio of each COG category to revenues and to total quality costs.

2. Based on the results of requirement 1, would you conclude that Costen’s quality program has beer successful? Prepare a short report to present your case.

3. Based on the 2008 survey, Jessica Tolmy believed that Costen had to improve product quality. In making her case to Costen management, how might Tolmy have estimated the opportunity cost of not implementing the quality-improvement program?

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
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Related Book For  answer-question

Cost Accounting A Managerial Emphasis

ISBN: 978-0136126638

13th Edition

Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav

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