Managerial Accounting

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Notice Trends in Quality Costs Over Time


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?


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


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


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


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