Compute quality cost as a percentage of sales

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Reference no: EM132580475

The Nothern distrubtion started to analyse the quality costs for the last three years. In start the Qulaity Cost audit report was prepared for the last three years . year 1 ( year 0) and after two years ( Year 2) data is given as following in connection to different quality costs.

Factors

Year 0 (5)

Year 2 151

Sales

6,000000

9,000,000

Turning

20.000

90.000

Quality Palnning

20.000

86.000

Other Qulaity Improvement

40.000

60.000

Supplier Evaulation

30.000

40.000

Testing

100.000

120.000

Quality performance Measurement

10.000

60.000

Supplier Nfonitring

60.000

40.000

Customer SUrryCS

10.000

30.000

Rework & Reject Reinspection & testing

150,000
30,000

55.000
35,000

Equipment Failure

50.000

30,000

Downtime

50,000

20,000

Product Liabaility Insurance

250.000

70.000

Warrenty Repairs

120.000

100.000

Customer Lesses (Estimated)

1400.000

600.000

Required

Question 1. Classify the cost as Appraisal, Preventive, Internal & external failure.

Question 2. Compute quality cost as a percentage of sales for each of the duration . By how much has profit increased because of quality improvements?

Question 3. Assuming that quality costs can be reduced by 7.2 % of year 2 quality cost furher at year 5 , how much additional profit is available through quality improvements (assume that sales revenues will remain the same)?

Question 4. Prepare a quality cost report for year 2 .

Reference no: EM132580475

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