Manhattan Mills Corp

question 48

Essay

Manhattan Mills Corp. has identified the following selected quality costs:
▪ Warranty costs: $80,000
▪ Employee training: $30,000
▪ Repair of units prior to shipment to customers: $15,000
▪ Quality engineering: $70,000
▪ Product inspection during manufacturing: $40,000
▪ Travel to customer sites to perform repairs: $8,000
Required:
A. Compute the company's prevention, appraisal, internal failure, and external failure costs.
B. Does a "hidden" quality cost sometimes occur when bad units enter the marketplace? Briefly explain.
C. Which of the following could have greater negative ramifications for Manhattan Mills: $100,000 of internal failure costs or $100,000 of external failure costs? Why?

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Definitions:

Cash

Cash in the form of coins or paper money, ready for trading or banking activities.

Beginning Balance

The amount of money or value of an account at the start of a new accounting period.

Ending Balance

The final amount in an account at the end of a reporting period, after all additions and subtractions have been accounted for.

Revenue Account

An account that records the income earned by a company from its business activities.