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Question 3 (25 Marks) Al Khoud Corporation produces custom made dashboards for international car manufacturers in the GCC States. It provides the following costing data: Quantity Sold Selling Price per unit Prevention Costs Appraisal Costs Improvement Costs 590,000 Rework OMR8 Scrap OMR121,000 Product Replacements Costs OMR19,000 Lost of sales from Repeating Customers OMR52,500 Contribution Margin OMR24,000 OMR1,200 OMR35,100 OMR87,750 45% A customer satisfaction survey suggests that an alarming number of car manufacturers were upset because the products did not meet their specifications, causing them to return and seek replacements. Al Khoud Corporation decided to embark on production improvement process which costs are provided in the table above. Following the production improvement process, the following impacts are forecasted: Percentage decrease in Product Replacement Costs Percentage decrease in Lost of sales from Repeating Customers 70% 60% 6 Page You are required to (a) Explain with proper numerical justifications whether Al Khoud Corporation should continue with the (10 marks) production improvement process. (b) Calculate the prevention, appraisal, internal failure, and external failure costs as a percentage of (10 total quality costs (CoQ) and as a percentage of sales before and after the change in the production process. 7|Pase (C) Provide your comments on your results in (b) above. Question 3 (25 Marks) Al Khoud Corporation produces custom made dashboards for international car manufacturers in the GCC States. It provides the following costing data: Quantity Sold Selling Price per unit Prevention Costs Appraisal Costs Improvement Costs 590,000 Rework OMR8 Scrap OMR121,000 Product Replacements Costs OMR19,000 Lost of sales from Repeating Customers OMR52,500 Contribution Margin OMR24,000 OMR1,200 OMR35,100 OMR87,750 45% A customer satisfaction survey suggests that an alarming number of car manufacturers were upset because the products did not meet their specifications, causing them to return and seek replacements. Al Khoud Corporation decided to embark on production improvement process which costs are provided in the table above. Following the production improvement process, the following impacts are forecasted: Percentage decrease in Product Replacement Costs Percentage decrease in Lost of sales from Repeating Customers 70% 60% 6 Page You are required to (a) Explain with proper numerical justifications whether Al Khoud Corporation should continue with the (10 marks) production improvement process. (b) Calculate the prevention, appraisal, internal failure, and external failure costs as a percentage of (10 total quality costs (CoQ) and as a percentage of sales before and after the change in the production process. 7|Pase (C) Provide your comments on your results in (b) above