Denise Seals - Week Six Excerise

# Denise Seals - Week Six Excerise - Internal failure costs \$...

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Denise Seals Managerial Accounting MBAC5213OL Dr. Lemler April 8, 2009 Week 6 – Exercises 15.6Quality Cost; Distribution Across Categories; Gainsharing LO1, LO2,LO3,LO4 1. Compute the quality costs/sales ratio for each year. Is this type of improvement possible? Quality cost/sales 2001 2008 \$ 12,000,000/\$ 48,000,000 = 25% \$ 1,500,000/\$ 60,000,000 = 2.5% Yes 2. Calculate the relative distribution of quality costs by category for 2001 (quality costs by category/total quality costs). What do you think of the relative cost distributed as the company approaches a zero-defects state? 2001 % of total quality cost Internal failure costs \$ 3,600,000 30 % External failure costs 4,800,000 40% Appraisal cost 2,160,000 18% Prevention cost 1,440,000 12% Total quality costs \$ 12,000,000 100% \$ 3,600,000/\$ 12,000,000 = .3 \$ 4,800,000/\$ 12,000,000 = .4

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\$ 2,160,000/\$ 12,000,000 = .18 \$ 1,440,000/\$ 12,000,000 = .12 3. Calculate the relative distribution of quality costs? Do you think further reductions are possible? 2008 % of total quality cost
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Unformatted text preview: Internal failure costs \$ 180,000 12 % External failure costs 120,000 8 % Appraisal cost 450,000 30% Prevention cost 750,000 50% Total quality costs \$ 1,500,000 100% \$ 180,000/\$ 1,500,000 = .12 \$ 120,000/\$ 1,500,000 = .08 \$ 450,000/\$ 1,500,000 = .30 \$ 750,000/\$ 1,500,000 = .50 4. Suppose that the CEO of Lander received a bonus equal to 10 percent of the quality cost saving each year. Do you think gainsharing is a good or bad idea? What risks are there, if any, to gainsharing? 16-12 Cycle Time and conversions Cost per Unit LO4 1. Compute the theoretical conservation cost per unit. Theoretical conversion cost \$ 4.50 X 15min = \$ 67.50 per unit 2. Compute the applied conversion cost per unit (the amount of conversion cost actually to the product). Actual cycle time 60 min / 3 units = 20 min per unit Actual conversion costs \$ 4.50 X 20 = \$ 90 per unit 3. Discuss how this approach to assigning conversion costs can improve delivery time performance....
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## This note was uploaded on 03/25/2010 for the course MBAC 6605 taught by Professor Smith during the Spring '10 term at Baylor.

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Denise Seals - Week Six Excerise - Internal failure costs \$...

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