Forums › CIMA Forums › Cost of Quality
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- August 26, 2024 at 12:51 pm #710370
CAL manufactures and sell solar panels for garden lights. CAL is preparing its budgets for the coming year and has estimated that the market demand for its type of solar panels will be 100000 units and that its share will be 20000 units, i.e. 20% of the available market. The standard cost details of each solar panel are as follows:
$per unit
selling price 60
bought in components (1 set) 15
assembly and machining cost 25
delivery cost 5
contribution 15An analysis of CAL’s recent performance revealed that 2% of the solar panels supplied to customers were returned for free replacement, because the customer found that they were faulty. These returned panels cannot be repaired and have no scrap value. If the supply of faulty solar panels to customers could be eliminated then, due to improved customer perception, CAL’s market share would increase to 25%.
Assuming that CAL continues with its present systems and that the percentage of quality failings is as stated above, calculate based on the budgeted figures and sales returns rate, the total relevant costs of quality .
My answer is as follows:
* Faulty good return costs: 400 units*(15+25+5)=18000
* Opportunity cost of quality: (5000 units*15 contribution)=75000Total $93000- ANS
Please correct me if I’m wrong
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