Chapter 19: Q19-20RQ (page 1063)
What is the purpose of quality management systems?
The primary purpose of the quality management system is the continuous improvement of business services.
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Rennie Plant Service completed a special landscaping job for Brenton Company. rennie uses ABC and has the following predetermined overhead allocation rates:
Activity Predetermined
Allocation Base Overhead Allocation Rate
Designing Number of designs \( 290 per design
Planting Number of plants \) 20 per plant
The Rennie job included \(1,500 in plants; \)800 in direct labor; one design; and 30 plants.
Requirements
1. What is the total cost of the Brenton job?
Why are some quality costs hard to measure?
What are the inventory accounts used in JIT costing?
Question:Roxi, Inc. is using a costs-of-quality approach to evaluate design engineering efforts for a new skateboard. Roxi’s senior managers expect the engineering work to reduceappraisal, internal failure, and external failure activities. The predicted reductionsin activities over the two-year life of the skateboards follow. Also shown are thepredetermined overhead allocation rates for each activity.
Activity | Predicted Reduction in Activity Units | Predetermined Overhead Allocation Rate per unit |
Inspection of incoming raw materials | 395 | \( 44 |
Inspection of finished goods | 395 | 26 |
Number of defective units discovered in-house | 1,500 | 54 |
Number of defective units discovered by customers | 275 | 73 |
Lost profits due to dissatisfied customers | 100 | 103 |
Requirements
1. Calculate the predicted quality cost savings from the design engineering work.
2. Roxi spent \)106,000 on design engineering for the new skateboard. What is the net benefit of this “preventive” quality activity?
3. What major difficulty would Roxi’s managers have in implementing this costs-of quality approach? What alternative approach could they use to measure quality improvement?
The Alexander Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in smartphones. Consider the following data regarding component T24 (amounts are per unit):
Direct materials cost \( 81.00
Direct labor cost 21.00
Activity-based costs allocated ?
Total manufacturing product cost ?
The activities required to build the component follow:
Activity | Allocation Base | Cost Allocated to Each Unit |
Start Station | Number of raw component chassis | 3 X \)1.50 = \(4.50 |
Dip Insertion | Number of dip insertions | ? X 0.50 = 14.50 |
Manual Insertion | Number of manual insertions | 13 X 0.40 = ? |
Wave solder | Number of components solders | 3 X 1.50 = 4.50 |
Backload | Number of backload insertions | 7 X ? = 2.80 |
Test | Number of testing hours | 0.39 60.0 = ? |
Defect analysis | Number of defect analysis hours | 0.10 X ? = 4.00 |
Total activity-based costs | \) ? |
Requirements
1. Complete the missing items for the two tables.
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