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			$

Answer rating: 100% (QA)

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