Problem:
Analyzing costs of quality
Christi, Inc., is using a costs-of-quality approach to evaluate design engineering efforts for a new skateboard. Christi's senior managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activities over the 2-year life of the skateboards follow. Also shown are the cost allocation rates for each activity.
|
Activity
|
Predicted Reduction in Activity Units
|
Activity Cost Allocation Rate Per Unit
|
|
Inspection of incoming materials
|
420
|
$ 37
|
|
Inspection of finished goods
|
420
|
26
|
|
Number of defective units
|
|
|
|
discovered in-house
|
1,400
|
56
|
|
Number of defective units
|
|
|
|
discovered by customers
|
325
|
75
|
|
Lost sales to dissatisfied customers
|
150
|
103
|
Requirements
1. What are the major features of a JIT production system such as that of High Point?
2. Prepare summary journal entries for February. Under- or over allocated conversion costs are closed to Cost of goods sold monthly.
3. Use a T-account to determine the February 29, 2012, balance of Raw and in-process inventory.