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 activity analysis revealed the following:
able[[Activities,Activity Cost],[Correcting invoice errors,$20,320
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 activity analysis revealed the following
Activities
Activity Cost
Correcting invoice errors
$20,320
Disposing of incoming materials with poor quality
15,240
Disposing of scrap
71,120
Expediting late production
60,960
Final inspection
40,640
Inspecting incoming materials
10,160
Inspecting work in process
55,880
Preventive machine maintenance
35,560
Producing product
172,720
Responding to customer quality complaints
25,400
Total
$508,000
The production process is complicated by quality problems, reguiring the production manager to expedite production and dispose of
scrap.
Required:
1. 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.
Value-Added/
Activity Cost of Quality Cost Classification
Non-Value-Added
Activity
Classification
Correcting invoice errors
$20,320
Disposing of incoming materials with poor quality
15,240
Disposing of scrap
71,120
Expediting late production
60,960
Final inspection
40,640
Inspecting incoming materials
10,160
Inspecting work in process
55,880
Preventive machine maintenance
35,560
Producing product
172,720
Responding to customer quality complaints
25,400
Total
$508,000
2. Use the activity cost information to determine the percentages of total costs that are prevention, appraisal, internal failure,external
