You have been hired as a Cost Accountant by Sundial, Inc., which produces sunglasses. Your duties include developing cost standards for materials and labor, designing and implementing cost accounting systems, defining various product and operational costs, analyzing production costs and recommending changes. When the trial period is over, you will have a performance review to demonstrate the completed tasks and gained knowledge. You have read the Cost of Quality Report of Sundial, Inc. and discovered that quality costs constitute 4.2% of sales. The amount is enormous, and your boss asks you to develop a set of measures to reduce it. Sundial, Inc. Cost of Quality Report For the Year Cost of Quality Percent of Sales ($32,000,000) Prevention costs $160,000 0.5% Appraisal costs $192,000 0.6% Internal failure costs $576,000 2.8% External failure costs $416,000 1.3% Total cost of quality $1,344,000 4.2% 3) Develop a set of measures that Sundial, Inc. has to undertake in order to reduce the cost of quality. Provide at least five measures and explain in your own words how their implementation would impact the costs of quality and Sundial’s performance.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 33P: Big Mikes, a large hardware store, has gathered data on its overhead activities and associated costs...

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You have been hired as a Cost Accountant by Sundial, Inc., which produces sunglasses. Your duties include developing cost standards for materials and labor, designing and implementing cost accounting systems, defining various product and operational costs, analyzing production costs and recommending changes. When the trial period is over, you will have a performance review to demonstrate the completed tasks and gained knowledge.

You have read the Cost of Quality Report of Sundial, Inc. and discovered that quality costs constitute 4.2% of sales. The amount is enormous, and your boss asks you to develop a set of measures to reduce it.

Sundial, Inc.

Cost of Quality Report

For the Year

Cost of Quality Percent of Sales ($32,000,000)

Prevention costs $160,000 0.5%

Appraisal costs $192,000 0.6%

Internal failure costs $576,000 2.8%

External failure costs $416,000 1.3%

Total cost of quality $1,344,000 4.2%

3) Develop a set of measures that Sundial, Inc. has to undertake in order to reduce the cost of quality. Provide at least five measures and explain in your own words how their implementation would impact the costs of quality and Sundial’s performance.

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