Pareto Chart and Cost of Quality Report for a Manufacturing Company The presiden
ID: 2578511 • Letter: P
Question
Pareto Chart and Cost of Quality Report for a Manufacturing Company
The president of Mission Inc. has been concerned about the growth in costs over the last several years. The president asked the controller to perform an activity analysis to gain a better insight into these costs. The result of the activity analysis is summarized as follows:
Required:
2. Classify the activities into prevention, appraisal, internal failure, external failure, and not costs of quality (producing product). Classify the activities into value-added and non-value added activities.
1. On paper or in a spreadsheet program, prepare a Pareto chart for each of the activities listed above. Answer the following:
What type of chart is a Pareto chart?
Which activity appears first, in order from left to right?
3. Use the activity cost information to determine the percentages of total department costs that are prevention, appraisal, internal failure, external failure, and not costs of quality. If required, round percentages to one decimal place.
4. Determine the percentages of total department costs that are value-added and non-value-added. If required, round percentages to one decimal place.
5. The department has 42% of its total costs as . costs represent 31% of the total costs. This means there is opportunity for cost savings. costs represent 11% of the total department costs.
Activity Activity Cost Cost of Quality Classification VA/NVA Correcting invoice errors $28,620 Disposing of incoming materials with poor quality 23,850 Disposing of scrap 66,780 Expediting late production 57,240 Final inspection 47,700 Inspecting incoming materials 9,540 Inspecting work in process 52,470 Preventive machine maintenance 33,390 Producing product 133,560 Responding to customer quality complaints 23,850 Total $477,000Explanation / Answer
2.
3.
4.
5.THE ABOVE CHART STATES THAT ONLY 42% OF TOTAL COST IS VALUE ADDED COST ,AN 58% IS NON VALUE ADDED SO COMPANY SHOULD MAKE IMPROVEMENT TO DECREASE THE NVA COST AND INCREASE THE VA COST.
AS WE CAN SEE IN POINT 3 MOST OF THE COST ARE DEDICATED THE INTERNAL OR EXTERNAL FAILURE,INSTEAD OF THAT COMPANY SHOULD INVEST MORE IN PREVENTIVE AND APPRAISAL COST TO REDUCE INTERNAL AND EXTERNAL FAILURE COST.
INTERNAL COST REPRESENT 31% OF TOTAL COST AND EXTERNAL COST REPRESENT 11 % OF TOTAL COST.
Activity Activity Cost Cost of Quality Classification VA/NVA Correcting invoice errors $28,620 External Failure NVA Disposing of incoming materials with poor quality 23,850 INTERNAL FAILURE NVA Disposing of scrap 66,780 INTERNAL FAILURE NVA Expediting late production 57,240 INTERNAL FAILURE NVA Final inspection 47700.00 APPRAISAL VA Inspecting incoming materials 9540.00 APPRAISAL VA Inspecting work in process 52470.00 APPRAISAL VA Preventive machine maintenance 33,390 PREVENTION VA Producing product 133,560 NOT COST OF QUALITY 0 Responding to customer quality complaints 23,850 External Failure NVA Total $477,000Related Questions
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