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27/08/2022
Cornerstone Exercise 14.4 (Algorithmic)
Long-Term Performance Report
Nabors Company had actual quality costs for the year ended June 30, 2015, as given below.
Prevention costs: Prototype inspection$ 290,000 Vendor certification580,000 Total prevention costs$ 870,000Appraisal costs: Process acceptance$ 305,000 Test labor350,000 Total Appraisal costs$ 655,000Internal failure costs: Retesting$ 182,500 Rework365,000 Total internal failure costs$ 547,500External failure costs: Recalls$ 266,750 Product liability543,500 Total external failure costs$ 810,250Total quality costs$2,882,750
At the zero-defect state, Nabors expects to spend $362,500 on quality engineering, $72,500 on vendor certification, and $45,000 on packaging inspection. Assume sales to be $3,000,000.
Required:
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1. Prepare a long-range performance report for 2015. What does this report tell the management of Nabors? Enter all answers as positive amounts. If the budget variance amount is unfavorable enter “U” in the last column of the table. Enter “F” if it is favorable. Round percentage answers to two decimal places, if rounding is required. For example, 5.789% would be entered as “5.79”. Enter “0” as the target cost amount if there would be no cost at the zero-defect state.
Nabors Company
Long-Range Performance Report
For the Year Ended June 30, 2015
Actual Costs
Target Costs
Budget Variance
Favourable (F) or Unfavorable (U)
Prevention costs:
Packaging inspection
Product liability
Prototype inspection
Recalls
Retesting
Correct 14 of Item 1
$
Correct 15 of Item 1
$
Correct 16 of Item 1
$
Correct 17 of Item 1
Correct 18 of Item 1
Packaging inspection
Product liability
Recalls
Retesting
Vendor certification
Correct 19 of Item 1
Correct 20 of Item 1
Correct 21 of Item 1
Correct 22 of Item 1
Correct 23 of Item 1
Total prevention costs
$
Correct 25 of Item 1
$
Correct 26 of Item 1
$
Correct 27 of Item 1
Correct 28 of Item 1
Appraisal costs:
Process acceptance
Product liability
Quality engineering
Recalls
Retesting
Correct 34 of Item 1
$
Correct 35 of Item 1
$
Correct 36 of Item 1
$
Correct 37 of Item 1
Correct 38 of Item 1
Product liability
Quality engineering
Recalls
Retesting
Test labor
Correct 39 of Item 1
Correct 40 of Item 1
Correct 41 of Item 1
Correct 42 of Item 1
Correct 43 of Item 1
Total appraisal costs
$
Correct 45 of Item 1
$
Correct 46 of Item 1
$
Correct 47 of Item 1
Correct 48 of Item 1
Internal failure costs:
Packaging inspection
Product liability
Quality engineering
Recalls
Retesting
Correct 54 of Item 1
$
Correct 55 of Item 1
Correct 56 of Item 1
$
Correct 57 of Item 1
Correct 58 of Item 1
Packaging inspection
Product liability
Quality engineering
Recalls
Rework
Correct 59 of Item 1
Correct 60 of Item 1
Correct 61 of Item 1
Correct 62 of Item 1
Correct 63 of Item 1
Total internal failure costs
$
Correct 65 of Item 1
Correct 66 of Item 1
$
Correct 67 of Item 1
Correct 68 of Item 1
External failure costs:
Packaging inspection
Quality engineering
Recalls
Retesting
Rework
Correct 74 of Item 1
$
Correct 75 of Item 1
Correct 76 of Item 1
$
Correct 77 of Item 1
Correct 78 of Item 1
Packaging inspection
Product liability
Quality engineering
Retesting
Rework
Correct 79 of Item 1
Correct 80 of Item 1
Correct 81 of Item 1
Correct 82 of Item 1
Correct 83 of Item 1
Total external failure costs
$
Correct 85 of Item 1
Correct 86 of Item 1
$
Correct 87 of Item 1
Correct 88 of Item 1
Total quality costs
$
Correct 90 of Item 1
$
Correct 91 of Item 1
$
Correct 92 of Item 1
Correct 93 of Item 1
Percentage of sales
Correct 95 of Item 1
%
Correct 96 of Item 1
%
Correct 97 of Item 1
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