Windy Kitchen is a manufacturer of baked beans. Kim Gordon isthe CEO of Windy...

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Accounting

Windy Kitchen is a manufacturer of baked beans. Kim Gordon isthe CEO of Windy Kitchen and a strong believer in continuousquality improvement. Recently, Kim asked her management accountant,Tom Hardee, to gather further information about quality costs forher company. Below is a list of quality-related costs manuallyprepared by Tom for the years 20X1 and 20X2.
20X1 20X2
Customer Returns $3,000 $8,000
Handling Customer Complaints $6,000 $5,000
Inspection of WIP $20,000 $10,000 Machines Repair $16,000$17,500
Product Recalls $2,000 $10,000
Quality Training $10,000 $8,000
Raw Materials Inspection $20,000 $15,000
Rework $15,000 $14,000 Scrap Processing $30,000 $40,000
Technical Training $50,000 $30,000 Total $172,000 $157,500
Sales revenue for Windy Kitchen was $500,000 in 20X1 and$550,000 in 20X2.
(a) Prepare a combined cost of quality report for Windy Kitchenfor both 20X1 and 20X2. Include proportions of the major qualitycost categories as a percentage of sales.
(b) When Kim, the CEO, receives the cost of quality report fromyou, she is amazed and says, “Why haven’t I been able to accessthis information from our accounting systems before?” Explain toKim why she may not have been able to easily extract thisinformation from the company’s accounting system?
(c) Kim is very happy that the total cost of quality hasdecreased from $172,000 to $157,500. She believes that the companyis moving in the right direction. Analyse and assess WindyKitchen’s quality improvement progress with respect to the cost ofquality information you have calculated in part (a). Do you agreewith Kim that the company is “moving in the right direction” onquality costs?

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3.7 Ratings (470 Votes)

A Windy Kitchen Quality Cost Report for the year ended 20X2 Quality Costs Year 20X2 Percentage of sales Year 20X1 Percentage of sales Prevention Costs Quality Training 8000 10000 Technical Training 30000 50000 Total 38000 7 60000 12 Appraisal Costs Inspection of WIP 10000 20000 Raw Material Inspection 15000 20000 Total 25000 5 40000 8 Internal Failure Cost Rework 14000 15000 Scrap Processing 40000 30000 Total 54000 See Answer

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In: AccountingWindy Kitchen is a manufacturer of baked beans. Kim Gordon isthe CEO of Windy Kitchen...Windy Kitchen is a manufacturer of baked beans. Kim Gordon isthe CEO of Windy Kitchen and a strong believer in continuousquality improvement. Recently, Kim asked her management accountant,Tom Hardee, to gather further information about quality costs forher company. Below is a list of quality-related costs manuallyprepared by Tom for the years 20X1 and 20X2.20X1 20X2Customer Returns $3,000 $8,000Handling Customer Complaints $6,000 $5,000Inspection of WIP $20,000 $10,000 Machines Repair $16,000$17,500Product Recalls $2,000 $10,000Quality Training $10,000 $8,000Raw Materials Inspection $20,000 $15,000Rework $15,000 $14,000 Scrap Processing $30,000 $40,000Technical Training $50,000 $30,000 Total $172,000 $157,500Sales revenue for Windy Kitchen was $500,000 in 20X1 and$550,000 in 20X2.(a) Prepare a combined cost of quality report for Windy Kitchenfor both 20X1 and 20X2. Include proportions of the major qualitycost categories as a percentage of sales.(b) When Kim, the CEO, receives the cost of quality report fromyou, she is amazed and says, “Why haven’t I been able to accessthis information from our accounting systems before?” Explain toKim why she may not have been able to easily extract thisinformation from the company’s accounting system?(c) Kim is very happy that the total cost of quality hasdecreased from $172,000 to $157,500. She believes that the companyis moving in the right direction. Analyse and assess WindyKitchen’s quality improvement progress with respect to the cost ofquality information you have calculated in part (a). Do you agreewith Kim that the company is “moving in the right direction” onquality costs?