Julia, president of Roo Inc. has been concerned about the growth in costs over the last several years. Julia asked the controller to perform an activity analysis to gain a better insight into these costs. The activity analysis revealed the following:
Activity Activity Cost
Correcting invoice errors (invoices have been printed-not mailed) $15,000
Disposing of scrap 39,000
Shipping late production with Federal Express (at company's cost) 33,000
Final inspection 20,000
Inspecting work in process 30,000
Preventative machine maintenance 18,000
Responding to customer quality complaints 18,000
Total $173,000
Using this information prepare a cost of quality report. Assume sales for the period were $600,000.
|
Quality Cost Classification
|
Quality Cost
|
Percent of Total quality cost
|
Percent of total Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Given your results in the report above, what would you suggest to Julia as a top priority? Why?