The following costs were incurred by Valley Fabrications Ltd to maintain the quality of its products during April:

operating an X-ray machine to detect faulty welds, $5 400

repairs to faulty products returned by customers, $12 000

cost of rewelding faulty joints discovered during processing, $3 800

cost of sending machine operators to a three-week quality training program, $11 600

cost of recalling faulty products, $20 000

legal fees related to product recall, $3 600

product inspection into finished goods warehouse, $3 400

cost to confirm a supplier’s quality accreditation, $600

cost of faulty goods that were scrapped, $16 800.

Please answer the questions below:

a) Prepare a cost of quality report similar to the report shown in Exhibit 16.11 below

b) Comment on the relative proportions of each of the four categories of quality costs.

Exhibit 16.11

 

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3 Internal failure costs 4 Scrap in production 5 Scrapped finished goods 6 Rework 7 Downtime 8 Total internal failure costs 9 External failure costs 10 Warranty costs 11 Out-of-warranty repairs and replacement 12 Servicing customer complaints 13 Transportation losses 14 Total external failure costs 15 Appraisal costs 16 Materials inspection 17 In-process inspection 18 Finished goods inspection 19 Laboratory testing 20 Total appraisal costs 21 Prevention costs A 22 Quality training 23 Quality planning 24 Quality reporting 25 Quality systems development 26 Total prevention costs 27 28 Total quality costs 29 B Current month's costs $2000 3000 2000 1 000 $8000 7 000 3 000 1000 2000 $13000 3000 2000 2000 4000 $11000 4000 1000 2000 5000 $12000 $44 000 C Percentage of total* 4.55% 6.82% 4.55% 2.27% 18.18% 15.91% 6.82% 2.27% 4.55% 29.55% 6.82% 4.55% 4.55% 9.09% 25.00% 9.09% 2.27% 4.55% 11.36% 27.27% 100.00% 3 Internal failure costs 4 Scrap in production 5 Scrapped finished goods 6 Rework 7 Downtime 8 Total internal failure costs 9 External failure costs 10 Warranty costs 11 Out-of-warranty repairs and replacement 12 Servicing customer complaints 13 Transportation losses 14 Total external failure costs 15 Appraisal costs 16 Materials inspection 17 In-process inspection 18 Finished goods inspection 19 Laboratory testing 20 Total appraisal costs 21 Prevention costs A 22 Quality training 23 Quality planning 24 Quality reporting 25 Quality systems development 26 Total prevention costs 27 28 Total quality costs 29 B Current month's costs $2000 3000 2000 1 000 $8000 7 000 3 000 1000 2000 $13000 3000 2000 2000 4000 $11000 4000 1000 2000 5000 $12000 $44 000 C Percentage of total* 4.55% 6.82% 4.55% 2.27% 18.18% 15.91% 6.82% 2.27% 4.55% 29.55% 6.82% 4.55% 4.55% 9.09% 25.00% 9.09% 2.27% 4.55% 11.36% 27.27% 100.00%

Answer rating: 100% (QA)

To prepare a cost of quality report we need to categorize the costs into the four categories Prevention Costs Appraisal Costs Internal Failure Costs and External Failure Costs a ... View the full answer