Problem 1. The Colorado Manufacturing Company of Boulder Colorado has gathered the following quality-related costs. You are hired as a consultant to evaluate these costs and to make recommendations to management.
a. Compute the ratio of prevention and appraisal costs to failure costs.
b. Identify strategies for reducing failure costs.
Annual Quality Costs
Failure Costs
Defective products 4,234
Engineering scrap 21,265
Noneengineering scrap 224,123
Consumer adjustments 125,654
Downgrading products 2,125,328
Lost Goodwill Not evaluated
Customer Policy Changes Not evaluated
TOTAL
Appraisal costs
Receiving Inspection 24,138
Line 1 inspection 7,256
Line 2 inspection 8,543
Spot Checking 2,766
TOTAL
Prevention costs
Quality training 25,500
Process engineering
Corporate 132,678
Plant 44,124
Product redesign 10,422
TOTAL
Problem 2. The Aggie Remanufacturing Company of College Station in Texas has gathered the following quality-related costs date:
a. Compute the ratio of prevention and appraisal costs to failure costs.
b. What would you recommend that this company do?
Annual Quality Costs
Failure Costs
Defective products 4,234
Engineering scrap 21,265
Noneengineering scrap 24,123
Consumer adjustments 25,654
Downgrading products 0
Lost Goodwill Not evaluated
Customer Policy Changes Not evaluated
TOTAL
Appraisal costs
Receiving Inspection 10,155
Line 1 inspection 9,225
Line 2 inspection 7,455
Spot Checking 9,766
TOTAL
Prevention costs
Quality training 25,500
Process engineering
Corporate 132,678
Plant 44,124
Product redesign 10,422
TOTAL