What do report indicate about the plants quality performance

Assignment Help Managerial Accounting

Reference no: EM13936926

Ethics and quality.

Anna-Greta Lantto, the assistant controller of Kiruna AB had recently prepared the follow- ing quality report comparing 2007 and 2006 quality performances.

	2007	2006
Sales	€90 000 000	€80 000 000
On-line inspection	€700 000	€600 000
Warranty liability	€2 250 000	€3 600 000
Product testing	€2 000 000	€1 000 000
Scrap	€2 700 000	€2 000 000
Design engineering	€1 800 000	€800 000
Percentage of customers
complaining about quality	3%	4%

Just two days after preparing the report, Lars Törnman, the controller, had called Lantto into his office. 'Our plant manager, Sven Töyrä, is quite upset with the recent costs of qual- ity and non-financial measures of quality reports that you prepared. He feels his workers have made significant progress in improving quality at the plant but that our reports are just not showing this. He wants to apply for various quality awards that would bring a lot of prestige to Kiruna, but he obviously cannot do so on the basis of the numbers we are reporting. Can you look over these quality numbers and see what you can do? I think Sven has a point. Nobody wants Kiruna to miss out on all the wonderful press we'd get if we won one of these quality awards.' Lantto is quite certain that her numbers are correct. Yet she would very much like Kiruna to win these prestigious quality awards. She is confused about how to handle Törnman's request.

Required

1. Calculate the ratio of each costs of quality category (prevention, appraisal, internal failure and external failure) to sales in 2006 and 2007.

2. What do the reports indicate about the plant's quality performance?

3. Is Lars Törnman's suggestion to Lantto to recalculate her quality numbers unethical? Would it be unethical for Lantto to modify her analysis? What steps should Lantto take to resolve this situation?

Reference no: EM13936926

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