-Wallace Communications Ltd produces paints and primers in its factory.In recent years, the company's market share has been eroded by stiff competition from overseas. Two years ago, the company's CEO decided to devote more resources to improving product quality. He set up a task force from various areas of the factory, including: production, customer services, sales, and accounting.
|
Cost Item
|
Year 1
|
Year 2
|
|
Machine maintenance..................
|
$ 215,000
|
$160,000
|
|
Final testing ..............................
|
160,000
|
94,000
|
|
Warranty repairs........................
|
69,000
|
23,000
|
|
Customer returns
|
262,000
|
80,000
|
|
Incoming inspection
|
45,000
|
22,000
|
|
Training suppliers
|
5,000
|
15,000
|
|
Scrap
|
68,000
|
40,000
|
|
Rework
|
120,000
|
62,000
|
|
Design reviews
|
20,000
|
95,000
|
|
Total Quality Cost
|
$964,000
|
$591,000
|
Total production costs for year 1 was $4,120,000 and for year 2 was $4,510,000.
Required:
(a) Prepare a Quality Cost Report for Wallace Communications Ltd.
(b) By analysing the quality cost report you prepared above, determine if the company's quality improvement programme has been successful.
(c) There are different views of how quality can be managed. While a certain level of quality may be accepted, there is an argument to aim for the highest level of quality. Discuss these two views of "quality as cost" and "quality as value".