In response to intensive foreign competition, the management of Florex Company has attempted over the past year to improve the quality of its products. A statistical process control system has been installed and other steps have been taken to decrease the amount of warranty and other field costs, which have been trending upward over the past several years. Costs relating to quality and quality control over the last two years are given below: Costs (in thousands)x
Last Year This Year
Inspection $900 $1,503
Quality engineering $ 450 $ 720
Depreciation of test equipment $ 135 $ 315
Rework labor $1,080 $1,890
Statistical process control $0 $ 180
Cost of field servicing $1,260 $1,170
Supplies used in testing $ 45 $ 72
Systems development $ 540 $ 900
Warranty repairs $4,680 $1,530
Net cost of scrap $ 720 $ 1,260
Product testing $1080 $1,350
Product recalls $2,880 $ 1,080
Disposal of defective products $ 900 $ 900
Sales have been flat over the past few years, at 90,000,000 per year. A great deal of money has been spent in the effort to upgrade quality, and management is anxious to see whether or not the effort has been effective
Required:
Prepare a quality cost report that contains data for both this year and last year.