Godunov Company's Quality Cost Report Is to Be Based on the Following

question 92

Essay

Godunov Company's quality cost report is to be based on the following data:

$\begin{array}{ll}\text { Downtime caused by quality problems } & \$ 12,000 \\\text { Rework labour and overhead } & \$ 42,000 \\\text { Quality circles } & \$ 34,000 \\\text { Returns arising from quality problems } & \$ 97,000 \\\text { Supervision of testing and inspection activities } & \$ 20,000 \\\text { Test and inspection of in-process goods } & \$ 98,000 \\\text { Systems development } & \$ 38,000 \\\text { Amortization of test equipment } & \$ 24,000 \\\text { Warranty repairs and replacements } & \$ 60,000\end{array}$

Required:

Prepare a quality cost report in good form with separate sections for prevention costs,appraisal costs,internal failure costs,and external failure costs.

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Definitions:

Top-Down Budgeting

A budgeting approach where the budget is created by top-level management and then distributed to lower levels for implementation.

Bottom-Up Budgeting

A budgeting process where the budget is prepared with the input and estimates coming from lower-level staff, before being aggregated and approved at higher levels.

Operating Budgets

A financial plan that estimates the expected income and expenses for a specific period in the future, often used to guide business activities.

Continuous Budgets

Budgets that are regularly updated by adding a new period as the current period is completed, facilitating constant financial planning.