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Managerial Accounting

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Notice Trends in Quality Costs Over Time

MGRACT-OSWB12

At the beginning of the year, Donpo Company initiated a quality improvement program. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding year:

Annual data Last Year This Year
Sales \$2,400,000 \$2,400,000
Quality training \$30,000 \$48,000
Material inspections \$7,000 \$8,000
Product scrapped \$48,000 \$30,000
Product re-worked \$60,000 \$48,000
Product inspections \$10,000 \$12,000
Product warranty claims \$36,000 \$24,000

Examining the change in the costs of quality, what conclusions might you make from this data?

A

The increase in quality, if any, has not lowered the cost of quality.

B

The increase in the cost of product and material inspections shows a troubling trend.

C

The shift from cost of failure to prevention and detection has reduced total cost of quality.

D

The decrease in warranty claims has led to decreases in sales returns and customer complaints.