Cornerstone Exercise 14.4 (Algorithmic) Long-Term Performance Report Nabors Company had actual quality costs for the year ended June 30, 2015, as...

Cornerstone Exercise 14.4 (Algorithmic)

Long-Term Performance Report

Nabors Company had actual quality costs for the year ended June 30, 2015, as given below.

Prevention costs:   Prototype inspection$ 290,000   Vendor certification580,000     Total prevention costs$ 870,000Appraisal costs:   Process acceptance$ 305,000   Test labor350,000     Total Appraisal costs$ 655,000Internal failure costs:   Retesting$ 182,500   Rework365,000     Total internal failure costs$ 547,500External failure costs:   Recalls$ 266,750   Product liability543,500     Total external failure costs$ 810,250Total quality costs$2,882,750

At the zero-defect state, Nabors expects to spend $362,500 on quality engineering, $72,500 on vendor certification, and $45,000 on packaging inspection. Assume sales to be $3,000,000.

Required:

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1. Prepare a long-range performance report for 2015. What does this report tell the management of Nabors? Enter all answers as positive amounts. If the budget variance amount is unfavorable enter "U" in the last column of the table. Enter "F" if it is favorable. Round percentage answers to two decimal places, if rounding is required. For example, 5.789% would be entered as "5.79". Enter "0" as the target cost amount if there would be no cost at the zero-defect state.

Nabors Company

Long-Range Performance Report

For the Year Ended June 30, 2015

Actual Costs

Target Costs

Budget Variance

Favourable (F) or Unfavorable (U)

Prevention costs:

Packaging inspection

Product liability

Prototype inspection

Recalls

Retesting

Correct 14 of Item 1

$

Correct 15 of Item 1

$

Correct 16 of Item 1

$

Correct 17 of Item 1

Correct 18 of Item 1

Packaging inspection

Product liability

Recalls

Retesting

Vendor certification

Correct 19 of Item 1

Correct 20 of Item 1

Correct 21 of Item 1

Correct 22 of Item 1

Correct 23 of Item 1

Total prevention costs

$

Correct 25 of Item 1

$

Correct 26 of Item 1

$

Correct 27 of Item 1

Correct 28 of Item 1

Appraisal costs:

Process acceptance

Product liability

Quality engineering

Recalls

Retesting

Correct 34 of Item 1

$

Correct 35 of Item 1

$

Correct 36 of Item 1

$

Correct 37 of Item 1

Correct 38 of Item 1

Product liability

Quality engineering

Recalls

Retesting

Test labor

Correct 39 of Item 1

Correct 40 of Item 1

Correct 41 of Item 1

Correct 42 of Item 1

Correct 43 of Item 1

Total appraisal costs

$

Correct 45 of Item 1

$

Correct 46 of Item 1

$

Correct 47 of Item 1

Correct 48 of Item 1

Internal failure costs:

Packaging inspection

Product liability

Quality engineering

Recalls

Retesting

Correct 54 of Item 1

$

Correct 55 of Item 1

Correct 56 of Item 1

$

Correct 57 of Item 1

Correct 58 of Item 1

Packaging inspection

Product liability

Quality engineering

Recalls

Rework

Correct 59 of Item 1

Correct 60 of Item 1

Correct 61 of Item 1

Correct 62 of Item 1

Correct 63 of Item 1

Total internal failure costs

$

Correct 65 of Item 1

Correct 66 of Item 1

$

Correct 67 of Item 1

Correct 68 of Item 1

External failure costs:

Packaging inspection

Quality engineering

Recalls

Retesting

Rework

Correct 74 of Item 1

$

Correct 75 of Item 1

Correct 76 of Item 1

$

Correct 77 of Item 1

Correct 78 of Item 1

Packaging inspection

Product liability

Quality engineering

Retesting

Rework

Correct 79 of Item 1

Correct 80 of Item 1

Correct 81 of Item 1

Correct 82 of Item 1

Correct 83 of Item 1

Total external failure costs

$

Correct 85 of Item 1

Correct 86 of Item 1

$

Correct 87 of Item 1

Correct 88 of Item 1

Total quality costs

$

Correct 90 of Item 1

$

Correct 91 of Item 1

$

Correct 92 of Item 1

Correct 93 of Item 1

Percentage of sales

Correct 95 of Item 1

%

Correct 96 of Item 1

%

Correct 97 of Item 1