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Chapter 19: Q19-23RQ (page 1063)
What are quality improvement programs?
Quality improvement programs are intended to avoid, detect, and prevent the poor quality of goods or services at the internal or external level.
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Question:Gateway produces electronic calculators. Suppose Gateway’s standard cost per calculator is \(25 for direct materials and \)68 for conversion costs. The following data applyto August activities:
Direct materials purchased (on account) \( 8,300
Conversion costs incurred 20,500
Number of calculators produced 300 calculators
Number of calculators sold (on account, at \)105 each) 295 calculators
Requirements
1. Prepare summary journal entries for August using JIT costing, including the entryto adjust the Conversion Costs account.
2. The beginning balance of Finished Goods Inventory was $1,300. Use a T-accountto find the ending balance of Finished Goods Inventory.
Goodwin, Inc. manufactures children’s sandals. Similar sandals manufactured by competitors sell for $12.50 per pair. Goodwin desires a 20% net profit margin. What is Goodwin’s target cost?
Clason, Inc. manufactures door panels. Suppose Clason is considering spending the following amounts on a new total quality management (TQM) program:
___________________________________________________________________
Strength-testing one item from each batch of panels \( 68,000
Training employees in TQM 27,000
Training suppliers in TQM 39,000
Identifying suppliers who commit to on-time delivery of
perfect-quality materials 58,000
Clason expects the new program would save costs through the following:
___________________________________________________________________
Avoid lost profits from lost sales due to disappointed customers \) 86,000
Avoid rework and spoilage 63,000
Avoid inspection of raw materials 57,000
Avoid warranty costs 15,000
Requirements
1. Classify each cost as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.
2. Should Clason implement the new quality program? Give your reason.
Answer
Darby Corp. is considering the use of activity-based costing. The following information is provided for the production of two product lines:
Activity Cost Allocation Base
Setup \( 105,000 Number of setups
Machine maintenance 60,000 Number of machine hours
Total indirect manufacturing costs \) 165,000
Product A Product B Total
Direct labor hours 7,000 5,000 12,000
Number of setups 30 170 200
Number of machine hours 1,600 2,400 4,000
Darby plans to produce 375 units of Product A and 250 units of Product B. Compute the ABC indirect manufacturing cost per unit for each product.
What is a just-in-time management system?
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