2.1. Backwoods American, Inc, produces expensive water-repellent, down-filled parkas. The company implemented a total quality-manage- ment program in 2014. Following are quality-related accounting data that have been accumulated for the five-year period after the program's start. Year 2015 2016 2017 2018 2019 Quality Costs (000s) Prevention $3.2 10.7 28.3 42.6 50.0 Appraisal 26.3 29.2 30.6 24.1 19.6 Internal failure 39.1 51.3 48.4 35.9 32.1 External failure 118.6 110.5 105.2 91.3 65.2 Accounting Measures (000s) Sales $2,700.6 2,690.1 2,705.3 2,310.2 2,880.7 Manufacturing cost 420.9 423.4 424.7 436.1 435.5 a. Compute the company's total failure costs as a percentage of total quality costs for each of the five years. Does there appear to be a trend to this result? If so, speculate on what might have caused the trend. b. Compute prevention costs and appraisal costs, each as a per- centage of total costs, during each of the five years. Speculate on what the company's quality strategy appears to be. c. Compute quality-sales indices and quality-cost indices for each of the five years. Is it possible to assess the effectiveness of the compa- ny's quality-management program from these index values? d. List several examples of each quality-related cost-that is, pre- vention, appraisal, and internal and external failure-that might result from the production of parkas. 2.2. The Backwoods American company in Problem 2.1 produces approximately 20,000 parkas annually. The quality management pro- gram the company implemented was able to improve the average per- centage of good parkas produced by 2% each year, beginning with 83% good-quality parkas in 2015. Only about 20% of poor-quality parkas can be reworked. a. Compute the product yield for each of the five years. b. Using a rework cost of $12 per parka, determine the manufac- turing cost per good parka for each of the five years. What do these results imply about the company's quality management program?
2.1. Backwoods American, Inc, produces expensive water-repellent, down-filled parkas. The company implemented a total quality-manage- ment program in 2014. Following are quality-related accounting data that have been accumulated for the five-year period after the program's start. Year 2015 2016 2017 2018 2019 Quality Costs (000s) Prevention $3.2 10.7 28.3 42.6 50.0 Appraisal 26.3 29.2 30.6 24.1 19.6 Internal failure 39.1 51.3 48.4 35.9 32.1 External failure 118.6 110.5 105.2 91.3 65.2 Accounting Measures (000s) Sales $2,700.6 2,690.1 2,705.3 2,310.2 2,880.7 Manufacturing cost 420.9 423.4 424.7 436.1 435.5 a. Compute the company's total failure costs as a percentage of total quality costs for each of the five years. Does there appear to be a trend to this result? If so, speculate on what might have caused the trend. b. Compute prevention costs and appraisal costs, each as a per- centage of total costs, during each of the five years. Speculate on what the company's quality strategy appears to be. c. Compute quality-sales indices and quality-cost indices for each of the five years. Is it possible to assess the effectiveness of the compa- ny's quality-management program from these index values? d. List several examples of each quality-related cost-that is, pre- vention, appraisal, and internal and external failure-that might result from the production of parkas. 2.2. The Backwoods American company in Problem 2.1 produces approximately 20,000 parkas annually. The quality management pro- gram the company implemented was able to improve the average per- centage of good parkas produced by 2% each year, beginning with 83% good-quality parkas in 2015. Only about 20% of poor-quality parkas can be reworked. a. Compute the product yield for each of the five years. b. Using a rework cost of $12 per parka, determine the manufac- turing cost per good parka for each of the five years. What do these results imply about the company's quality management program?
Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
ChapterC: Cases
Section: Chapter Questions
Problem 5.3SD: Scenario 4 Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling...
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