Calculate the ratio of each coq category to revenues in

Question

Cost-of-Quality (COQ) Analysis The Duncan Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its primary customers are aviation manufacturers and maintenance companies. The following table contains financial information pertaining to cost of quality (COQ) in 2010 and 2011 in thousands of dollars:

	2010	2011
Sales	$15,000	$18,750
Materials inspection	300	60
Production inspection	160	125
Finished product inspection	225	70
Preventive  equipment maintenance	20	60
Scrap (net)	500	300
Warranty repairs	700	400
Product design engineering	150	270
Vendor certification	10	60
Direct costs of returned goods	250	80
Training of factory workers	40	140
Product  testing-equipment  maintenance	60	60
Product testing labor	210	90
Field repairs	70	30
Rework before shipment	240	180
Product-liability  settlement	360	60
Emergency repair and maintenance	190	60

Required

1. Classify the cost items in the table into cost-of-quality (COQ) categories.

2. Calculate the ratio of each COQ category to revenues in each of the two years.

3. Comment on the results.

4. In addition to the financial measures listed in the table, what nonfinancial measures might Duncan Materials Company monitor in its effort to achieve overall improvements in quality?

5. Are financial or nonfinancial quality measures likely of more use to: (a) managers? (b) operating per- sonnel? Why?

Answer 1

Question: The Duncan Materials Company prepares and vends synthetic coatings which can withstand high temperatures. Its main customers are aviation manufacturers and maintenance companies. The table illustrated includes financial information pertaining to the cost of quality (COQ) in the year 2010 and year 2011 in thousands of dollars: 1) Categorize the cost items in the table to cost-of-quality categories. 2) Compute the ratio of every COQ category to revenues in each of the 2 years. 3) Provide comment on the results. 4) Moreover to the financial measures listed in the table, illustrate what non-financial measures may Duncan Materials Company monitor in its effort to accomplish overall enhancements in quality? 5) Are financial or non-financial quality measures probable of more use to: (i) managers? (ii) Operating personnel? Explain why?