Beruflich Dokumente
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DISCUSSION QUESTIONS
Q7-1. Quality costs may be grouped into the following three classifications:
1. Prevention costs are the costs incurred to
prevent product failure. They include the
cost of designing high quality products
and production systems, including the
costs of implementing and maintaining
such systems.
2. Appraisal costs are the costs incurred to
detect product failure. They include the
cost of inspecting and testing materials,
inspecting products during production,
and the cost of obtaining information from
customers about product satisfaction.
3. Failure costs are the costs incurred when a
product fails, and may occur internally or
externally. Internal failure costs are those
that occur during the manufacturing or production process (e.g., scrap, spoilage, and
rework), and external failure costs are
those that occur after the product has
been sold (e.g., warranty repairs and
replacements, sales refunds, handling
customer complaints, and lost sales
resulting from poor product quality).
Q7-2. TQM stands for total quality management,
which is a company-wide approach to quality
improvement in all processes and activities.
TQM is a pervasive philosophy of doing business that applies to all functional areas of the
company and to all personnel.
Q7-3. Five characteristics of TQM systems are:
1. The companys objective for all business
activity is to serve its customers. The term
product is extended to include services
as well as goods, and customer includes
internal users as well as those outside of
the company who purchase the companys
products. Each employees activity is oriented to providing service to the customer.
2. Top management provides an active
leadership role in the quality improvement
movement.
3. All employees are actively involved in
quality improvement. Employees are not
only asked to contribute ideas, but also to
Q7-4.
Q7-5.
Q7-6.
Q7-7.
7-1
7-2
Large quality costs indicate large opportunities for improvement. Also, measurements
provide a basis for monitoring the cost of
quality and evaluating improvements.
Q7-8. Scrap includes (1) the filings and trimmings
remaining after processing materials, (2)
defective materials that cannot be used or
returned to the vendor, and (3) broken parts
resulting from employee errors or machine
failures. Spoiled goods differ from scrap in
that they are partially or fully completed units
that are in some way defective and are not
economically or physically correctable.
Spoiled goods may be units of the product or
component parts, and they may or may not
have a salvage value. Rework is the process
of correcting defective manufactured goods.
Q7-9. The cost of scrap, spoilage, and rework
should not be ignored, because such costs
Chapter 7
Chapter 7
7-3
EXERCISES
E7-1
(1)
(2)
(3)
(4)
E7-2
E7-3
E7-4
E7-5
1,650
1,650
1,650
1,650
120
112
1,650
1,650
1,650
1,650
232
1,000
1,700
24,300
10,000
94,000
700
6,600
27,000
104,000
150
250
300
6,600
7-4
E7-6
Chapter 7
Work in Process............................................................
Materials (1,000 units $1).................................
Payroll (1,000 units 1/6 hour $15) ................
Applied Factory Overhead (1,000 1/6 $30)..
8,500
73,500
110,250
1,000
2,500
5,000
73,500
110,250
Chapter 7
7-5
E7-7
(1)
Island Company
Forming Department
Cost of Production Report
For August
Quantity Schedule
Beginning inventory ...............................
Started in process this period ..............
Materials
100%
100%
Labor
60%
100%
Units
8,000
Overhead
50%
100%
Quantity
1,000
9,000
10,000
8,000
1,500
500
10,000
Total
Cost
$ 1,260
770
1,400
$ 3,430
Equivalent
Units*
Unit
Cost**
$36,240
10,510
21,725
$68,475
$71,905
10,000
9,400
9,250
$3.75
1.20
2.50
$7.45
Total Cost
$59,600
500
500
500
100%
100%
100%
$3.75
1.20
2.50
$1,875
600
1,250
1,500
1,500
1,500
100%
60%
50%
$3.75
1.20
2.50
$5,625
1,080
1,875
3,725
8,580
$71,905
7-6
Chapter 7
E7-7 (Concluded)
*Total number of equivalent units required in the cost accounted for section determined as follows:
Materials
8,000
1,500
500
10,000
Labor
8,000
900
500
9,400
Overhead
8,000
750
500
9,250
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
(2)
59,600
3,725
63,325
Chapter 7
7-7
E7-8
(1)
Juniper Company
Finishing Department
Cost of Production Report
For July
Quantity Schedule
Beginning inventory................................
Received from Cutting Department.......
Materials
Labor
Overhead
40%
100%
20%
100%
20%
100%
Units
3,800
Quantity
500
4,500
5,000
3,800
800
400
5,000
Total
Cost
$ 5,500
1,950
1,180
1,770
$ 10,400
Equivalent
Units*
Unit
Cost**
$ 54,500
20,650
16,260
24,390
$115,800
$126,200
5,000
4,520
4,360
4,360
$12.00
5.00
4.00
6.00
$27.00
400
Total Cost
$102,600
$10.00
400
400
100%
800
800
800
800
100%
40%
20%
20%
4,000
$27.00
10.00
$10,800
4,000
$12.00
5.00
4.00
6.00
$ 9,600
1,600
640
960
6,800
12,800
$126,200
7-8
Chapter 7
E7-8 (Concluded)
*Total number of equivalent units required in the cost accounted for section determined as follows:
Prior
Dept. Cost Materials
3,800
3,800
800
320
400
400
5,000
4,520
Labor
3,800
160
400
4,360
Overhead
3,800
160
400
4,360
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
(2)
102,600
4,000
6,800
113,400
Chapter 7
E7-9
(1)
7-9
Quantity Schedule
Beginning inventory................................
Started in process this period ...............
Transferred to Refining Department......
Ending inventory .....................................
Lost in process .......................................
Materials
Conversion Cost
100%
70%
Units
49,000
6,000
6,000
Quantity
5,000
55,000
60,000
49,000
6,000
5,000
60,000
Total
Cost
$ 1,900
240
$ 2,140
Equivalent
Units*
$20,100
5,080
$25,180
$27,320
55,000
53,200
.40
.10
$.40
.10
$
Unit
Cost**
.50
Total Cost
$24,500
$2,400
420
2,820
$27,320
*Total number of equivalent units required in the cost accounted for section determined as follows:
Materials
49,000
6,000
55,000
Conversion Cost
49,000
4,200
53,200
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
(2)
24,500
24,500
7-10
Chapter 7
E7-10 APPENDIX
(1)
Suarez Company
Tooling Department
Cost of Production Report
For March
Quantity Schedule
Beginning inventory................................
Started this period ..................................
Transferred to Finishing Department ....
Ending inventory .....................................
Spoiled in process ..................................
Materials
100%
Labor
70%
100%
100%
60%
90%
Overhead
60%
40%
90%
Quantity
2,000
13,000
15,000
7,000
3,000
5,000
15,000
Total
Cost
$ 1,600
290
950
$ 2,840
Equivalent
Units*
$ 9,750
2,380
9,200
$21,330
$24,170
13,000
11,900
11,500
Unit Cost
Units
Current %
Unit
Cost**
$.75
.20
.80
$1.75
Total Cost
$2,840
2,000
2,000
2,000
5,000
0%
30%
40%
100%
$ .75
.20
.80
$1.75
0
120
640
$ 3,600
8,750
$12,350
5,000
5,000
5,000
100%
90%
90%
$ .75
.20
.80
$3,750
900
3,600
3,000
3,000
3,000
100%
60%
40%
$ .75
.20
.80
$2,250
360
960
8,250
3,570
$24,170
Chapter 7
7-11
Materials
0
5,000
3,000
5,000
13,000
Labor
600
5,000
1,800
4,500
11,900
Overhead
800
5,000
1,200
4,500
11,500
** Cost added during the current period divided by the number of equivalent units of cost added during the current period
(2)
12,350
8,250
20,600
7-12
Chapter 7
E7-11 APPENDIX
(1)
Quantity Schedule
Beginning inventory................................
Received from Fabricating Department
Transferred to Finished Goods ..............
Ending inventory .....................................
Spoiled in process ..................................
Materials
80%
Labor
40%
Overhead
40%
100%
100%
60%
100%
60%
100%
Quantity
1,200
6,000
7,200
5,000
1,500
700
7,200
Total
Cost
$ 14,160
1,210
1,300
3,250
$ 19,920
Equivalent
Units*
Unit
Cost**
$ 72,000
6,240
12,240
30,600
$121,080
$141,000
6,000
6,240
6,120
6,120
$12.00
1.00
2.00
5.00
$20.00
Chapter 7
7-13
Units
Current %
Unit Cost
Total Cost
$19,920
1,200
1,200
1,200
3,800
20%
60%
60%
100%
$ 1.00
2.00
5.00
$20.00
240
1,440
3,600
$ 25,200
76,000
$101,200
700
$12.00
700
700
100%
1,500
1,500
1,500
1,500
100%
100%
60%
60%
8,400
$20.00
12.00
$14,000
8,400
$12.00
1.00
2.00
5.00
$18,000
1,500
1,800
4,500
5,600
25,800
$141,000
*Number of equivalent units of cost added during the current period determined as follows:
Prior Dept.
Cost
0
3,800
1,500
700
6,000
Material
240
3,800
1,500
700
6,240
Labor
720
3,800
900
700
6,120
Overhead
720
3,800
900
700
6,120
** Cost added during the current period divided by the number of equivalent units of cost added during the current period
(2)
101,200
8,400
5,600
115,200
7-14
Chapter 7
E7-12 APPENDIX
(1)
Quantity Schedule
Beginning inventory................................
Received from Mixing Department ........
Transferred to Bottling Department ......
Ending inventory .....................................
Lost in process........................................
Materials
75%
Labor
25%
100%
75%
Overhead
25%
75%
Quantity
10,000
40,000
50,000
37,000
8,000
5,000
50,000
Total
Cost
$ 2,920
305
140
210
$ 3,575
Equivalent
Units*
$10,850
1,500
2,430
3,645
35,000
37,500
40,500
40,500
$18,425
$22,000
Unit Cost
Units
Current %
Unit
Cost**
$.31
.04
.06
.09
$.50
Total Cost
$3,575
10,000
10,000
10,000
27,000
25%
75%
75%
100%
$.04
.06
.09
$.50
100
450
675
$ 4,800
13,500
$18,300
8,000
8,000
8,000
8,000
100%
100%
75%
75%
$.31
.04
.06
.09
$2,480
320
360
540
3,700
$22,000
Chapter 7
7-15
Prior
Dept. Cost Materials
0
2,500
27,000
27,000
8,000
8,000
35,000
37,500
Labor
7,500
27,000
6,000
40,500
Overhead
7,500
27,000
6,000
40,500
** Cost added during the current period divided by the number of equivalent units of cost added during the current period
(2)
18,300
18,300
7-16
Chapter 7
PROBLEMS
P7-1
(1)
(2)
350
1,450
900
1,800
550
350
P7-2
(1)
(2)
3,000
600
86,400
120,960
3,000
87,000
121,800
3,600
86,400
120,960
3,000
87,000
121,800
Chapter 7
7-17
P7-3
(1)
(2)
2,000
200,000
300,000
Work in Process............................................................
Materials (100 units $2)....................................
Payroll (100 units 1/2 hour $12 rate) ..........
Applied Factory Overhead
(100 1/2 hr $24 rate) .............................
2,000
202,000
303,000
200
600
1,200
200,000
300,000
200
600
1,200
202,000
303,000
7-18
P7-4 (1)
Chapter 7
Billingsley Company
Cutting Department
Cost of Production Report
For April
Quantity Schedule
Beginning inventory................................
Started in process this period ...............
Transferred to Assembling Department
Ending inventory .....................................
Spoiled in process ..................................
Materials
100%
100%
Labor
60%
90%
Units
18,000
Overhead
60%
90%
Quantity
5,000
20,000
25,000
18,000
4,000
3,000
25,000
Total
Cost
$ 1,260
789
1,789
$ 3,838
Equivalent
Units*
Unit
Cost**
$36,240
10,761
21,311
$68,312
$72,150
25,000
23,100
23,100
$1.50
.50
1.00
$3.00
Total Cost
$54,000
3,000
3,000
3,000
100%
90%
90%
$1.50
.50
1.00
$4,500
1,350
2,700
4,000
4,000
4,000
100%
60%
60%
$1.50
.50
1.00
$6,000
1,200
2,400
8,550
9,600
$72,150
*Total number of equivalent units required in the cost accounted for section determined as follows:
Materials
18,000
4,000
3,000
25,000
Labor
18,000
2,400
2,700
23,100
Overhead
18,000
2,400
2,700
23,100
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
Chapter 7
7-19
P7-4 (Continued)
Billingsley Company
Assembling Department
Cost of Production Report
For April
Quantity Schedule
Beginning inventory................................
Received from Cutting Department.......
Materials
Labor
Overhead
80%
100%
20%
100%
20%
100%
Units
17,000
Quantity
4,000
18,000
22,000
17,000
4,000
1,000
22,000
Total
Cost
$ 12,000
38,028
3,356
5,034
$ 58,418
Equivalent
Units*
Unit
Cost**
54,000
163,372
15,444
23,166
$255,982
$314,400
22,000
21,200
18,800
18,800
$ 3.00
9.50
1.00
1.50
$15.00
1,000
Total Cost
$255,000
$ 3.00
1,000
1,000
100%
4,000
4,000
4,000
4,000
100%
80%
20%
20%
3,000
$15.00
3.00
$15,000
3,000
$3.00
9.50
1.00
1.50
$12,000
30,400
800
1,200
12,000
44,400
$314,400
7-20
Chapter 7
P7-4 (Concluded)
* Total number of equivalent units required in the cost accounted for section determined as follows:
Prior
Dept. Cost Materials
17,000
17,000
4,000
3,200
1,000
1,000
22,000
21,200
Labor
17,000
800
1,000
18,800
Overhead
17,000
800
1,000
18,800
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
(2)
54,000
8,550
255,000
3,000
12,000
62,550
270,000
Chapter 7
7-21
P7-5
(1)
Quantity Schedule
Beginning inventory................................
Started in process this period ...............
Transferred to Canning Department......
Ending inventory .....................................
Lost in process .......................................
Materials
100%
Labor
40%
Units
28,000
%
Complete
100%
6,000
6,000
6,000
100%
40%
40%
Overhead
40%
Quantity
4,000
36,000
40,000
28,000
6,000
6,000
40,000
Total
Cost
$ 600
88
128
$ 816
Equivalent
Units*
$4,840
824
1,088
$6,752
$7,568
34,000
30,400
30,400
$.16
.03
.04
$.23
Unit Cost
$.23
$.16
.03
.04
Unit
Cost**
Total Cost
$6,440
$960
72
96
1,128
$7,568
*Total number of equivalent units required in the cost accounted for section determined as follows:
Materials
28,000
6,000
34,000
Labor
28,000
2,400
30,400
Overhead
28,000
2,400
30,400
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
7-22
Chapter 7
P7-5 (Continued)
Hulvey Brewery Company
Canning Department
Cost of Production Report
For January
Quantity Schedule
Beginning inventory................................
Received from Mixing and
Brewing Department ........................
Transferred to Finished Goods Inventory
Ending inventory .....................................
Spoiled in process .................................
Materials
Labor
Quantity
2,000
28,000
30,000
100%
100%
60%
80%
Overhead
60%
80%
25,000
1,000
4,000
30,000
Total
Cost
$ 550
190
75
150
$ 965
Equivalent
Units*
Unit
Cost**
$ 6,440
1,520
789
1,578
$10,327
$11,292
30,000
30,000
28,800
28,800
$.233
.057
.030
.060
$.380
Units
25,000
%
Complete
100%
Unit Cost
$.380
4,000
4,000
4,000
4,000
100%
100%
80%
80%
$.233
.057
.030
.060
$932
228
96
192
1,000
1,000
1,000
1,000
100%
100%
60%
60%
$.233
.057
.030
.060
$233
57
18
36
Total Cost
$ 9,500
1,448
344
$11,292
Chapter 7
7-23
P7-5 (Concluded)
*Total number of equivalent units required in the cost accounted for section determined as follows:
Prior
Dept. Cost Materials
Equivalent units transferred out .....
25,000
25,000
Equivalent units in ending inventory
1,000
1,000
Equivalent units of spoilage ............
4,000
4,000
Total equivalent units .......................
30,000
30,000
Labor
25,000
600
3,200
28,800
Overhead
25,000
600
3,200
28,800
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
(2)
6,440
9,500
1,448
6,440
10,948
7-24
Chapter 7
P7-6 APPENDIX
(1)
Quantity Schedule
Beginning inventory................................
Started this period ..................................
Transferred to Finishing Department ....
Ending inventory .....................................
Spoiled in process ..................................
Materials
100%
Labor
70%
100%
100%
40%
60%
Overhead
70%
40%
60%
Quantity
2,000
9,000
11,000
9,000
1,500
500
11,000
Total
Cost
$ 1,900
340
1,020
$ 3,260
Equivalent
Units*
Unit
Cost**
$ 9,180
2,125
6,375
$17,680
$20,940
9,000
8,500
8,500
$1.02
.25
.75
$2.02
Chapter 7
7-25
Units
Current %
Unit Cost
Total Cost
$3,260
2,000
2,000
7,000
30%
30%
100%
$ .25
.75
$2.02
150
450
$ 3,860
14,140
$18,000
500
500
500
100%
60%
60%
$1.02
.25
.75
$ 510
75
225
1,500
1,500
1,500
100%
40%
40%
$1.02
.25
.75
$1,530
150
450
810
2,130
$20,940
*Number of equivalent units of cost added during the current period determined as follows:
Materials
0
7,000
1,500
500
9,000
Labor
600
7,000
600
300
8,500
Overhead
600
7,000
600
300
8,500
** Cost added during the current period divided by the number of equivalent units of cost added during the current period
7-26
Chapter 7
Materials
100%
Labor
40%
Overhead
40%
100%
100%
60%
100%
60%
100%
Quantity
3,000
9,000
12,000
9,900
2,000
100
12,000
Total
Cost
$ 6,100
3,500
520
780
$10,900
Equivalent
Units*
Unit
Cost**
$18,000
10,800
4,000
6,000
$38,800
$49,700
9,000
9,000
10,000
10,000
$2.00
1.20
.40
.60
$4.20
Chapter 7
7-27
Units
Current %
Unit Cost
Total Cost
$10,900
3,000
3,000
6,900
60%
60%
100%
100
$ .40
.60
$4.20
720
1,080
$1.00
100
100
100%
2,000
2,000
2,000
2,000
100%
100%
60%
60%
$12,700
28,980
$41,680
100
$4.20
1.00
420
100
$2.00
1.20
.40
.60
$ 4,000
2,400
480
720
320
7,600
$49,700
* Number of equivalent units of cost added during the current period determined as follows:
Prior
Dept. Cost Materials
0
0
6,900
6,900
2,000
2,000
100
100
9,000
9,000
Labor
1,800
6,900
1,200
100
10,000
Overhead
1,800
6,900
1,200
100
10,000
** Cost added during the current period divided by the number of equivalent units of cost added during the current period
(2)
18,000
810
41,680
100
320
18,810
42,100
7-28
Chapter 7
P7-7 APPENDIX
(1)
Quantity Schedule
Beginning inventory................................
Started this period ..................................
Transferred to Refining Department......
Ending inventory. ....................................
Lost in process........................................
Materials
100%
Labor
20%
100%
80%
Overhead
20%
80%
Quantity
4,000
16,000
20,000
14,000
2,000
4,000
20,000
Total
Cost
$ 3,624
96
480
$ 4,200
Equivalent
Units*
Unit
Cost**
$10,800
1,480
7,400
$19,680
$23,880
12,000
14,800
14,800
$ .90
.10
.50
$1.50
Chapter 7
7-29
Units
Current %
Unit Cost
Total Cost
$4,200
4,000
4,000
10,000
80%
80%
100%
$ .10
.50
$1.50
320
1,600
$ 6,120
15,000
$21,120
2,000
2,000
2,000
100%
80%
80%
$ .90
.10
.50
$1,800
160
800
2,760
$23,880
* Number of equivalent units of cost added during the current period determined as follows:
Materials
0
10,000
2,000
12,000
Labor
3,200
10,000
1,600
14,800
Overhead
3,200
10,000
1,600
14,800
** Cost added during the current period divided by the number of equivalent units of cost added during the current period
7-30
Chapter 7
Materials
100%
Labor
50%
100%
30%
Overhead
50%
30%
Quantity
2,000
14,000
16,000
12,000
2,000
2,000
16,000
Total
Cost
$ 3,500
240
160
900
$ 4,800
Equivalent
Units*
Unit
Cost**
$21,120
1,440
1,740
10,440
$34,740
$39,540
12,000
12,000
11,600
11,600
$1.76
.12
.15
.90
Unit Cost
Units
Current %
$2.93
Total Cost
$4,800
2,000
2,000
10,000
50%
50%
100%
$ .15
.90
$2.93
150
900
$ 5,850
29,300
$35,150
2,000
2,000
2,000
2,000
100%
100%
30%
30%
$1.76
.12
.15
.90
$3,520
240
90
540
4,390
$39,540
Chapter 7
7-31
Prior
Dept. Cost Materials
0
0
10,000
10,000
2,000
2,000
12,000
12,000
Labor
1,000
10,000
600
11,600
Overhead
1,000
10,000
600
11,600
** Cost added during the current period divided by the number of equivalent units of cost added during the current period
(2)
21,120
35,150
21,120
35,150
7-32
Chapter 7
CASES
C7-1
Although improvement in product quality was clearly a stated goal at Star Disk
Corporation, the companys reward structure suggests otherwise. Employees
cannot be expected to put quality first if rewards are dispensed for achieving
objectives that are often in conflict with quality improvement (i.e., short-run
production volume goals). The quality improvement effort seems to have been
focused solely on manufacturing activity, and the approach taken seems to
have been to improve quality by inspecting it into the product. Such an
approach is inadequate, because it waits too late in the process (i.e., after costs
have been incurred in manufacturing defective products, instead of before) and
focuses on only one piece of the problem rather than the whole problem.
In order to turn the problem around, top management must become
actively involved. The reward structure should be changed to ensure compatibility with quality goals. Quality teams that include employees from all business
functions (product design as well as manufacturing) and all levels (labor as well
as management) should be created to help identify quality problems and find
ways to solve the identified problems. Top management should actively participate in these teams in order to emphasize the importance of quality, coordinate
efforts between organization units, and provide direction. Employees are more
likely to become motivated when they understand the importance of quality,
and top management participation and leadership underscore that importance.
In addition, all employees must refocus their efforts on serving their respective
customers. The data presented in the case suggest that managers from the different departments put all their attention on meeting production volume goals
rather than on meeting the needs of their customers (i.e., the department
receiving their output).
Although product inspection should be continued, emphasis should be
shifted to preventing poor quality rather than detecting it. Prevention should
start with product design and extend throughout the entire manufacturing
process. Some things to be considered include:
(a) reducing the number of parts required in the product;
(b) using higher quality materials;
(c) using standardized parts;
(d) using well-known production technologies where possible;
(e) minimizing retoolings;
(f)
increasing employee training;
(g) reorganizing the manufacturing facility from production departments to
manufacturing cells to promote teamwork and decrease inventory costs;
(h) upgrading or modifying machinery;
(i)
installing a statistical process control system to monitor production quality and reduce production variability.
Chapter 7
7-33
C7-1 (Concluded)
A few of the biggest and most urgent problems should be identified and
tackled. In order to achieve results, effort should be concentrated on a few
costly problems that can be solved. Tackling too many problems results in dispersed efforts and little observable accomplishment. Improving quality takes
time and never ends. The company and its employees need some successes to
build confidence and create the momentum needed to turn the quality problem
around.
C7-2