SKE Corporation manufactures large kitchen appliances. The following represents financial information for two years: Mr. Cheung is also reviewing the quality of various production process. Recently several competitors have introduced similar prototype chips with much higher quality and causing SKE's sales to decline. Mr. Cheung has embarked an intensive campaign to strengthen its quality control at the beginning of 2023. The costs relating to quality control were complied for 2021 and the full year of 2022. The related costs are shown below 2021 2022 Process Inspection 60,000 52,800 Scrap 60,200 57,600 Quality Training 440,000 610,000 Warranty repairs 150,000 140,000 Testing equipment 230,000 230,000 Resolving customer complaints 108,400 89,000 Rework 390,000 544,000 Preventive maintenance 304,000 440,000 Material Inspection 150,000 210,000 Field Testing 400,000 300,000 Total costs $2,292,600 $2,673,400 Required: a. Prepare a cost of quality (COQ) report for 2021 and 2022, calculate the ratio of each COQ category as a percentage of total cost of quality. (8 marks) b. Discuss briefly the effectiveness of the quality assurance program of this company. (7 marks)

SKE Corporation manufactures large kitchen appliances. The following represents financial information for two years: Mr. Cheung is also reviewing the quality of various production process. Recently several competitors have introduced similar prototype chips with much higher quality and causing SKE's sales to decline. Mr. Cheung has embarked an intensive campaign to strengthen its quality control at the beginning of 2023. The costs relating to quality control were complied for 2021 and the full year of 2022. The related costs are shown below 2021 2022 Process Inspection 60,000 52,800 Scrap 60,200 57,600 Quality Training 440,000 610,000 Warranty repairs 150,000 140,000 Testing equipment 230,000 230,000 Resolving customer complaints 108,400 89,000 Rework 390,000 544,000 Preventive maintenance 304,000 440,000 Material Inspection 150,000 210,000 Field Testing 400,000 300,000 Total costs $2,292,600 $2,673,400 Required: a. Prepare a cost of quality (COQ) report for 2021 and 2022, calculate the ratio of each COQ category as a percentage of total cost of quality. (8 marks) b. Discuss briefly the effectiveness of the quality assurance program of this company. (7 marks)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter14: Quality And Environmental Cost Management

Section: Chapter Questions

Problem 38P: In 2011, Milton Thayne, president of Carbondale Electronics, received a report indicating that...

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