7217151 COPQ Spreadsheet

Benefit to compensation ratio calculations

Line

1 ES Average engineer's salary, annual $ 43,000.00

2 Insurance costs: Life, medical, dental, disability per year $ 7,400.00

3 Bonuses, stock options, other incentives value per year $ 2,800.00

4 Retirement plan: maintenance and contributions costs per year $ 3,200.00

5 EB Engineer benefits ratio 31%

6 SS Average staff/supervisor salary, per year $ -

7 Insurance costs: Life, medical, dental, disability per year $ -

8 Bonuses, stock options, other incentives value per year $ -

9 Retirement plan: maintenance and contributions costs $ -

10 SB Staff/supervisor benefits ratio #DIV/0!

11 PS Average production personnel wage, per hour $ -

12 Insurance costs: Life, medical, dental, disability per year $ -

13 Bonuses, stock options, other incentives value per year $ -

14 Retirement plan: maintenance and contributions costs $ -

15 PB Production personnel benefits ratio #DIV/0!

16 BR Benefit ratio, averaged organization-wide #DIV/0!

Compensation cost calculations

17 ES Average engineer's salary, hourly $ 20.67

18 EB Engineer's benefits ratio, from line 5 31%

19 EC Engineering staff compensation cost per hour, averaged $ 27.12

20 SS Average supervisor salary, hourly $ -

21 SB Supervisor benefits ratio, from line 10 #DIV/0!

22 SC Supervisor compensation cost per hour, averaged #DIV/0!

23 PS Average production personnel wage, per hour $ -

24 PB Production personnel benefits ratio, from line 15 #DIV/0!

As an essential building block of the compensation formula, benefits ratios will differ among Engineering, supervisors/staff and hourly wage earners such as production personnel. The basic formula for all three is:

(Averaged benefits + “perks” + bonuses) divided by (Averaged hourly wages for one year)

Use the "BR" benefit ratio in Line 16 for worksheets computing absenteeism, employee turnover and productivity costs. Hypothetical numbers were used to demonstrate this worksheet. Left-click on the white cells in the far-right column and enter your own numbers to find your organization's compensation/ benefits costs. The peach-colored results cells will automatically calculate and display the ratios.

Salaries, wages, benefits ratios and compensation costs per hour have been automatically entered into lines 17-25 and calculated to hourly figures, using figures entered into lines 1-16.

Use the compensation costs EC, SC and PC (automatically calculated and shown in the yellow cells) when calculating the cost of poor quality and its effects on profits in Worksheet 2.

25 PC Production personnel compensation cost per hour, averaged #DIV/0!

Charting effects of change in quality

Worksheet 2. Step 1

Line Personnel time Code Value

1 Engineering compensation per hour EC $27.12

2 Engineering hours lost per event E 0.25

3 Supervisor compensation per hour SC $ 15.25

4 Supervisor hours lost per event S 0.50

5 Personnel compensation per hour EC $ 10.10

Monthly/cycle sales-to-profit ratio Value

6 Sales, per month or cycle $ 15,950

7 Profit, per month or cycle $ 2,350

Material rework costs Value

8 Scrap costs $ 60

9 Warranty item replacement costs $ 20

10 Shipping warranty product costs $ 1

11 Concessions costs to customers $ -

This series of tables tracks time costs as they were defined in Worksheet 1, and adds them to the cost of Engineering Review, rework, replacing items on warranty and scrap costs.

At least one set of measurements is taken before any efforts to change a process or policy are made. After a change is made to a process or policy, the subsequent measurements are compared against the baseline. Keeping

in mind that trends--gradual change--are more valuable as they accurately represent changes, a series of at least five or six measurements should be taken for assessment.

If you want to track the cost savings of one recurring problem, you can use the totals to assess Return on Investment (ROI).

Keep your methods for recording numbers of rework, scrap etcetera consistent! This helps ensure the results convincingly represents the effects of strategic change.

Instructions for using this worksheet

Only enter data in the pastel colored cells (not the dark red title cells)! The white cells automatically calculate data as you enter it, and send the calculated data to tables for automatically generating charts and graphs. Follow the instructions in this yellow block to enter, line by line, the data needed to assess results.

Line 1: Enter the figure from the blue cell EC on Line 19 in Worksheet 1.

Line 2: Enter the average amount of time, in decimals (.25 equals 15 minutes) for each Engineering Review (assessment of failed product).

Line 3: Enter the figure from the blue cell SC on Line 22 in Worksheet 1.

Line 4: Enter the average amount of time, in decimals, (.5 equals 30 minutes) for providing guidance and oversight in rework to production personnel.

Line 5: Enter the figure from the blue cell PC on Line 25 in Worksheet 1.

Line 6: Enter your organization's sales for the month or cycle.

Line 7: Enter your organization's profit for the month or cycle.

Line 8: Enter the cost for scrapped items wheredefects were found in-facility.

Line 9: Enter costs of items replaced for customersthrough warranty claims.

Line 10: Enter costs of shipping for items replacedthrough warranty claims.

Line 11: Enter costs of concessions to customersto resolve quality issues.

Line 12: Enter the amount of waste: materialsused to rework products.

Lines 13 to 15: Enter the name, and values of otheridentified material costs of poor quality.

Line 17: Enter the number of hours productionpersonnel spent reworking and reshipping products.

Line 18: Enter the number of rework events, either singly, or in groups or production runs.

Line 22: Enter the number of hours engineers usedto resolve production rework problems, includingpreparing, delivering and assessing results of training.

Line 23: Enter the number of hours supervisorsused to resolve production rework problems, including time preparing for and delivering training,and for assessments.

Line 24: Enter the number of hours that productionpersonnel used to resolve production reworkproblems, including time in training, and forassessments.

Line 26: Enter the amount spent on equipment:new, used, or for repairs, to resolve production reworkproblems.

Line 27: Enter the amount of materials used forresolving production rework problems, includingtraining materials.

Lines 28 and 29: Name and enter other costs forresolving production rework problems.

12 Waste: materials used to correct defects $ 5

13 Other $ 1

14 Other $ 1

15 Other $ 1

16 Total material costs $ 89.00

Time costs for poor quality Hours Value

17 Number of production hours for rework 7 $ 71

18 Number of rework events 2

19 Engineering time 1 $ 14

20 Supervisor time 1 $ 15

21 Total time costs $ 100

Line

Computing Return on Investment (ROI)

Time spent on correcting causes Hours Value

22 Engineering 0 $ -

23 Supervisors 0 $ -

24 Production personnel 0.06 $ 1

25 Total $ 1

Other costs of correcting causes Value

26 Equipment $ 1

27 Materials $ 1

28 Other $ -

29 Other $ -
























30 Total $ 2

Worksheet 2. Step 2

Line

Factors

6 Sales $ 12,500 $ 12,875 $ 13,858 $ 14,050 $ 14,750 $ 15,950

7 Profit $ 1,250 $ 1,257 $ 1,488 $ 1,650 $ 1,850 $ 2,350

Sales-to-profit ratio 10% 10% 11% 12% 13% 15%

8 Scrap $ 325 $ 275 $ 254 $ 202 $ 140 $ 60

9 Warranty $ 300 $ 275 $ 250 $ 175 $ 75 $ 20

10 Shipping $ 20 $ 20 $ 15 $ 10 $ 5 $ 1

11 Concessions $ 25 $ 20 $ 10 $ 10 $ 2 $ -

12 Waste $ 55 $ 40 $ 30 $ 25 $ 4 $ 5

13 Other $ 12 $ 10 $ 10 $ 10 $ 1 $ 1

14 Other $ 12 $ 10 $ 10 $ 5 $ 1 $ 1

15 Other $ 11 $ 11 $ 5 $ 5 $ 3 $ 1

16 Total material costs $ 760 $ 661 $ 584 $ 442 $ 231 $ 89

17 Production time $ 858 $ 780 $ 650 $ 585 $ 450 $ 71

19 Engineering time $ 152 $ 150 $ 140 $ 120 $ 80 $ 14

20 Supervisor time $ 98 $ 90 $ 98 $ 90 $ 25 $ 15

21 Total time costs $ 1,108 $ 1,020 $ 888 $ 795 $ 555 $ 100

Total cost of poor quality $ 1,868 $ 1,681 $ 1,472 $ 1,237 $ 786 $ 189

25 Time spent on correcting causes $ 190 $ 125 $ 25 $ 25 $ 10 $ 1

30 Other costs of correcting causes $ 585 $ 150 $ 85 $ 50 $ - $ 1

Total costs to correct quality problems $ 775 $ 275 $ 110 $ 75 $ 10 $ 2

Return on investment 3.19 to 1

Month/cycle Quality costs Sales Profit

Mo/cycle 1 $ 1,868 $ 12,500.00 $ 1,250

Mo/cycle 2 $ 1,681 $ 12,875.00 $ 1,488

Mo/cycle 3 $ 1,472 $ 13,858.00 $ 1,650

Mo/cycle 4 $ 1,237 $ 14,050.00 $ 1,850

Mo/cycle 5 $ 786 $ 14,750.00 $ 2,350

Mo/cycle 6 $ 189 $ 15,950.00 $ 2,350
























Enter data in the colored cells within this table at the end of each month or cycle. Begin by naming the month or cycle in the top row. Then enter the totals from the corresponding lines from the worksheet above: the left column

lines numbers match. Graphs and charts will automatically express the data as it is being entered.

Mo/cycle 1

Mo/cycle 2

Mo/cycle 3

Mo/cycle 4

Mo/cycle 5

Mo/cycle 6

Do not enter data in these cells! They automatically calculate, and send to the chart below, data that has been entered in the table above.

Month/cycle Quality costs Sales Profit

Mo/cycle 1 15% $ 12,500.00 $ 1,250

Mo/cycle 2 13% $ 12,875.00 $ 1,257

Mo/cycle 3 11% $ 13,858.00 $ 1,488

Mo/cycle 4 9% $ 14,050.00 $ 1,650

Mo/cycle 5 5% $ 14,750.00 $ 1,850

Mo/cycle 6 1% $ 15,950.00 $ 2,350

Mo/cycle 1 Mo/cycle 2 Mo/cycle 3 Mo/cycle 4 Mo/cycle 5 Mo/cycle 6 $-

$500

$1,000

$1,500

$2,000

$2,500

Quality costs and profit

Quality costs

Profit

Mo/cycle 1 Mo/cycle 2 Mo/cycle 3 Mo/cycle 4 Mo/cycle 5 Mo/cycle 60%

2%

4%

6%

8%

10%

12%

14%

16%

Quality costs and profit as percent of sales

Quality costs

Profit ra-tio

Per

cen

t o

f sa

les

Mo/cycle 1 Mo/cycle 2 Mo/cycle 3 Mo/cycle 4 Mo/cycle 5 Mo/cycle 6

$-

$50

$100

$150

$200

$250

$300

$350

Itemized material costs of poor quality

Scrap

Warranty

Shipping

Concessions

Waste

Other

Other

Other

Act

ual

co

sts


$-

$50

$100

$150

$200

$250

$300

$350


Scrap

Warranty

Shipping

Concessions

Waste

Other

Other

Other

Act

ual

co

sts


$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

Costs of poor quality in personnel time

Production time

Engineering time

Supervisor time

Act

ual

co

mp

ensa

tio

n c

ost

s

Charting effects of change in quality

Worksheet 2. Step 1

This series of tables tracks time costs as they were defined in Worksheet 1, and adds them to the cost of Engineering Review, rework, replacing items on warranty and scrap costs.

At least one set of measurements is taken before any efforts to change a process or policy are made. After a change is made to a process or policy, the subsequent measurements are compared against the baseline. Keeping

in mind that trends--gradual change--are more valuable as they accurately represent changes, a series of at least

If you want to track the cost savings of one recurring problem, you can use the totals to assess Return on

Keep your methods for recording numbers of rework, scrap etcetera consistent! This helps ensure the results


Only enter data in the pastel colored cells (not the The white cells automatically

calculate data as you enter it, and send the calculated data to tables for automatically generating charts and graphs. Follow the instructions in this yellow block to enter, line by line, the data needed to assess results.

Enter the figure from the blue cell EC on Line 19

Enter the average amount of time, in decimals (.25 equals 15 minutes) for each Engineering Review (assessment of failed product).

Enter the figure from the blue cell SC on Line 22

Enter the average amount of time, in decimals, (.5 equals 30 minutes) for providing guidance and oversight in rework to production personnel.

Enter the figure from the blue cell PC on Line 25

Enter your organization's sales for the month or

Enter your organization's profit for the month or

Enter the cost for scrapped items where

Enter costs of items replaced for customers

Enter costs of shipping for items replaced

Enter costs of concessions to customers

Enter the amount of waste: materials

Enter the name, and values of otheridentified material costs of poor quality.

Enter the number of hours productionpersonnel spent reworking and reshipping products.

Enter the number of rework events, either singly, or in groups or production runs.

Enter the number of hours engineers usedto resolve production rework problems, includingpreparing, delivering and assessing results of training.

Enter the number of hours supervisorsused to resolve production rework problems, including time preparing for and delivering training,

Enter the number of hours that productionpersonnel used to resolve production reworkproblems, including time in training, and for

Enter the amount spent on equipment:new, used, or for repairs, to resolve production rework

Enter the amount of materials used forresolving production rework problems, including

Name and enter other costs forresolving production rework problems.

























Worksheet 2. Step 2

Average

$ 13,997

$ 1,641

12%

$ 209.33

$ 182.50

$ 11.83

$ 11.17

$ 26.50

$ 7.33

$ 6.50

$ 6.00

$ 461.17

$ 565.67

$ 109.33

$ 69.33

$ 744.33

$ 1,205.50

$ 63

$ 145

$ 208

Profit ratio

10%

10%

11%

12%

13%

15%

























Enter data in the colored cells within this table at the end of each month or cycle. Begin by naming the month or cycle in the top row. Then enter the totals from the corresponding lines from the worksheet above: the left column

lines numbers match. Graphs and charts will automatically express the data as it is being entered.

Do not enter data in these cells! They automatically calculate, and send to the chart below, data

Profit ratio

10%

10%

11%

12%

13%

15%


$500

$1,000

$1,500

$2,000

$2,500

Quality costs and profit

Quality costs

Profit

Mo/cycle 1 Mo/cycle 2 Mo/cycle 3 Mo/cycle 4 Mo/cycle 5 Mo/cycle 60%

2%

4%

6%

8%

10%

12%

14%

16%

Quality costs and profit as percent of sales

Quality costs

Profit ra-tio

Per

cen

t o

f sa

les


$-

$50

$100

$150

$200

$250

$300

$350


Scrap

Warranty

Shipping

Concessions

Waste

Other

Other

Other

Act

ual

co

sts


$-

$50

$100

$150

$200

$250

$300

$350


Scrap

Warranty

Shipping

Concessions

Waste

Other

Other

Other

Act

ual

co

sts


$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

Costs of poor quality in personnel time

Production time

Engineering time

Supervisor time

Act

ual

co

mp

ensa

tio

n c

ost

s

Documents

7217151 COPQ Spreadsheet