Costs of quality. Scan It Company manufactures computer scanners. The following table presents financial information for two years.
|
|
Year 1
|
Year 2
|
|
Sales
|
$2,000,000
|
$1,800,000
|
|
Quality Costs:
|
|
|
|
Scrap
|
15,000
|
16,000
|
|
Repair of returned goods
|
35,000
|
40,000
|
|
Dealing with customer complaints
|
23,000
|
28,000
|
|
Rework (goods spoiled during production)
|
150,000
|
150,000
|
|
Materials inspection
|
55,000
|
40,000
|
a. Classify the above items into prevention, appraisal, internal failure, or external failure costs.
b. Calculate the percentage of each prevention, appraisal, internal failure, and external failure cost to sales for Year 1 and Year 2.