Part 2 (5 Points)

The CEO of Prairie Machine Parts (PMP) is concerned with the quality of its products
and the amount of resources currently spent on customer returns. The CEO would like
to analyze the costs incurred in conjunction with the quality of the product.

The following information was collected from various departments within the company:

Warranty returns $144,000

Training personnel 120,000
Litigation on product liability claims 210,000
Inspecting 10% of final products 6,000
Rework 12,000
Production loss due to machine breakdowns54,000
Inspection of raw materials 6,000

Required:
A. Complete the Cost of Quality Report (Form is Important use a table in Word) (3
pts.)
B. Do any additional subjective costs appear to be missing from the report? (1 pt.)
C. What can be learned from the report? (1 pt.)

Part 3 (5 points)
The following amounts were taken from the general ledger of the SMU Manufacturing
Company.

Raw materials inventory - beg. of Depreciation - plant &

year $50,000 equipment $26,000
Raw materials inventory - end of Repairs and maintenance -
year 56,000 plant 8,000
Work in process inv. - beg. of
year 100,000 Insurance on plant 18,000
Work in process inv. - end of General and administration
year 70,000 exp. 25,000
Finished goods inv. - beg. of year 36,000 Indirect labour 30,000
Finished goods inv. - end of year 50,000 Direct labour 164,000
Purchase of direct materials 30,000 Marketing expenses 40,000

Required:
A. Prepare a schedule for the cost of goods manufactured (3 Pts)
B. Prepare the cost of goods sold section of the income statement for the company
for the year. (2 pts)