The following represents the financial information of Fabriz Corporation, a manufacturer of electronic components, for two months: MarchAprilSales$539,000 $495,000 Costs: Process inspection 3,300 3,760 Scrap 3,700 3,860 Quality training 37,600 26,000 Warranty repairs 8,600 9,600 Testing equipment 14,000 14,000 Customer complaints 5,600 6,800 Rework 34,000 37,000 Preventive maintenance 27,000 19,000 Materials inspection 13,000 9,600 Field testing 18,800 24,800 Required:a. Classify these items into prevention, appraisal, internal failure, or external failure costs.b. Calculate the ratio of the prevention, appraisal, internal failure, and external failure costs to sales for March and April.
What will be an ideal response?
a. Prevention: Process inspection, quality training, testing equipment, preventive maintenance, materials inspection.
Appraisal: Field testing.
Internal failure: Scrap, rework.
External failure: Customer complaints, warranty repairs.
b.
| March | April | ||||
| Prevention: | 17.6 | % | 14.6 | % | |
| Appraisal: | 3.5 | % | 5.0 | % | |
| Internal failure | 7.0 | % | 8.3 | % | |
| External failure | 2.6 | % | 3.3 | % | |
March: $3,300 + $37,600 + $14,000 + $27,000 + $13,000 = $94,900/$539,000 = 17.6%.
April: $3,760 + $26,000 + $14,000 + $19,000 + $9,600 = $72,360/$495,000 = 14.6%.
Appraisal:
March: $18,800/$539,000 = 3.5%.
April: $24,800/$495,000 = 5.0%.
Internal failure:
March: $3,700 + $34,000 = $37,700/$539,000 = 7.0%.
April: $3,860 + $37,000 = $40,860/$495,000 = 8.3%.
External failure:
March: $5,600 + $8,600 = $14,200/$539,000 = 2.6%.
April: $6,800 + $9,600 = $16,400/$495,000 = 3.3%.
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