MajuJaya Manufacturing Sdn Bhd is a major industrial mixer producer in Northem area of Malaysia. The...

 

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MajuJaya Manufacturing Sdn Bhd is a major industrial mixer producer in Northem area of Malaysia. The company produces two types of mixers Delta and Fuzzy. Over the last few years, the company's financial performance has been excellent and investors have reacted t positively, driving up the share price. Each year, Maju Jaya produces annual reports consisting of detailed financial statements and few convincing statements about its commitment to the quality. Information on each model of mixer is as follows. Delta Fuzzy 40,000 units Units manufactured and sold 30,000 units RM1,500 Selling price RM600 RM800 RM300 Variable costs per unit Hours spent on design 7,500 hours 2,500 hours 1.0 hours 0.30 hours Testing and inspection hours per unit Percentage of units reworked in plant 7% 10% Rework costs per mixer RM400 RM150 4% 8% Percentage of units repaired at customer site Repair costs per mixer RM400 RM200 600 units 5.000 units Estimated lost sales due to poor quality (units) Percentage of customer complaints 3% 5% The labour rate for design is RM80 per hour, and the rate for testing and inspection is RM50 per hour. The plant managers of both Delta and Fuzzy departments are eligible for a bonus if the total costs of quality as a percentage of revenues are less than 10% and the percentage of customer complaints is less than 4%. Ahmad, the plant manager of Delta Department, is positive about his performance. However, Amirul, the plant manager of Fuzzy department is unhappy about the customer complaints of 5% because, when preparing this report, Norman, the controller actually surveyed customers regarding customer satisfaction. Amirul expected Norman to be less proactive and to wait for customers to complain. Amirul's concern with Norman's approach is that it introduces subjectivity into the results and also fails to capture the seriousness of customers" concerns. Amirul commented: "When you wait for a customer to complain, you know they are complaining because it is something important. When you do customer surveys, customers mention whatever is on their mind, even if it is not terribly important." Norman on the other hand, is confident that the customer's complaints are genuine and that customers are concerned about quality and service. He believes that it is important for MajuJaya to be proactive and obtain timely customer feedback, and then to use this information to make improvements. He is also well aware that Majulaya has not done customer surveys in the past. He is now confused about how to handle the bonus assessment issue for both plant managers. Required: 1. Prepare a cost of quality report for Delta and Fuzzy. Classify the costs into prevention costs, appraisal costs, internal failure costs and extemal failure costs. 2. Refer to your answer in requirement (1). Compare and comment on the costs of quality for Delta and Fuzzy. 3. Which plant manager would be entitled for the bonus? Would it be unethical for Norman, the controller, to modify his analysis? Explain. Provide your explanation from an ethical and Islamic perspective. 4. During one monthly operation meeting, engineer and marketing managers had a chat just before the start of the meeting. The engineer argues, "Quality means the product will perform faultlessly". A marketing manager retorts, "No, quality is whatever the customer says it is." Are these views conflicting? Explain. MajuJaya Manufacturing Sdn Bhd is a major industrial mixer producer in Northem area of Malaysia. The company produces two types of mixers Delta and Fuzzy. Over the last few years, the company's financial performance has been excellent and investors have reacted t positively, driving up the share price. Each year, Maju Jaya produces annual reports consisting of detailed financial statements and few convincing statements about its commitment to the quality. Information on each model of mixer is as follows. Delta Fuzzy 40,000 units Units manufactured and sold 30,000 units RM1,500 Selling price RM600 RM800 RM300 Variable costs per unit Hours spent on design 7,500 hours 2,500 hours 1.0 hours 0.30 hours Testing and inspection hours per unit Percentage of units reworked in plant 7% 10% Rework costs per mixer RM400 RM150 4% 8% Percentage of units repaired at customer site Repair costs per mixer RM400 RM200 600 units 5.000 units Estimated lost sales due to poor quality (units) Percentage of customer complaints 3% 5% The labour rate for design is RM80 per hour, and the rate for testing and inspection is RM50 per hour. The plant managers of both Delta and Fuzzy departments are eligible for a bonus if the total costs of quality as a percentage of revenues are less than 10% and the percentage of customer complaints is less than 4%. Ahmad, the plant manager of Delta Department, is positive about his performance. However, Amirul, the plant manager of Fuzzy department is unhappy about the customer complaints of 5% because, when preparing this report, Norman, the controller actually surveyed customers regarding customer satisfaction. Amirul expected Norman to be less proactive and to wait for customers to complain. Amirul's concern with Norman's approach is that it introduces subjectivity into the results and also fails to capture the seriousness of customers" concerns. Amirul commented: "When you wait for a customer to complain, you know they are complaining because it is something important. When you do customer surveys, customers mention whatever is on their mind, even if it is not terribly important." Norman on the other hand, is confident that the customer's complaints are genuine and that customers are concerned about quality and service. He believes that it is important for MajuJaya to be proactive and obtain timely customer feedback, and then to use this information to make improvements. He is also well aware that Majulaya has not done customer surveys in the past. He is now confused about how to handle the bonus assessment issue for both plant managers. Required: 1. Prepare a cost of quality report for Delta and Fuzzy. Classify the costs into prevention costs, appraisal costs, internal failure costs and extemal failure costs. 2. Refer to your answer in requirement (1). Compare and comment on the costs of quality for Delta and Fuzzy. 3. Which plant manager would be entitled for the bonus? Would it be unethical for Norman, the controller, to modify his analysis? Explain. Provide your explanation from an ethical and Islamic perspective. 4. During one monthly operation meeting, engineer and marketing managers had a chat just before the start of the meeting. The engineer argues, "Quality means the product will perform faultlessly". A marketing manager retorts, "No, quality is whatever the customer says it is." Are these views conflicting? Explain.

Answer rating: 100% (QA)

1 Delta Prevention Costs Design Costs 7500 hours x RM80 per hour RM600000 Testing and Inspection Costs 10 hours x RM50 per hour x 30000 units RM150000 ... View the full answer