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Managerial Accounting: Quality Improvement Programs, Facilities Layout and Cost-of-Quality Report Questions

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Quality improvement programs and cost savings Garber Valves Company manufactures brass valves meeting precise specification standards. All finished valves are inspected before packing and shipping to customers. Rejected valves are returned to the initial production stage to be meted and recast. Such rework requires no new materials in casting but requires new materials in finishing. The following unit cost data are available (see attached)

As a result of a quality-improvement program, the reject rate has decreased from 64% to 5.1%, and the number of rejects has decreased by (6.4% - 5.1%) x 10,000 units. Improvements in reject rates have also led to a decrease in work-in-process inventory from $386,000 to $270,000. Inventory carrying costs are estimated to be 15% per year. Estimate the annual cost savings as a result fo the quality improvement.

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Facilities Layout One aspect of facilities layout for McDonald's is that when customers come into the building they can line up in one of several lines and wait to be served. In contrast, customers at Wendy's are asked to stand in one line that snakes around the front of the counter and wait for a single server.

a. What is the rationale for each approach?
b. Which approach do you favor from (1) a customer's perspective and (2) management's perspective? Explain.

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Preparing a cost-of-quality report The following information (see attached) shows last year's quality-related costs for the Renwal Company.

a. Prepare a cost-of-quality report grouping costs into prevention, appraisal, internal failure, and external failure. Also show costs as a percent of sales.
b. Interpret the data and make recommendations to Renwal's management.

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This solution provides calculations and discussion in 565 words in an attached Word document to answer the three questions.

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Answer the following discussion points with operational concepts presented within the course material.
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Assignment Quality Requirements
• Includes an active attempt to present the information in a clear, and concise manner
• Includes one or more supporting citations for each discussion point. The primary supporting citation must be from the course text, and or, course support documents.
• Includes external support citations from a minimum of two peer-reviewed journal articles less than 5-years old. The supporting article references satisfy the writing requirements for conducting research beyond the course material.
(Basic definitions and concepts not cited from the course text and support materials will result in points deducted from the overall assignment score.)
• Formatted based on the standard APA citation rules
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• Reviewed and adjusted per writing requirements in the course Instructor

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