Task: Quality Cost Report
Green RIver Manufacturing Division makes a variety of home furnishings. In 2000 the company installed a system to report in quality costs. At the end of 2002 the division general manager wanted an assessment of whether quality costs in2002 differed from those in 2000. Each month the actual costs has been compared with the plan, but at this time the manager wanted to see only total annual numbers for 2002 compared with 2000. The production superisor prepared the following report.
|
Quality Cost Area
|
2000 cost
|
2002 cost
|
|
1. Prevention Cost
|
45
|
107
|
|
% of total Quality Cost
|
3.3%
|
12.3%
|
|
2. Appraisal Cost
|
124
|
132
|
|
% of total Quality Cost
|
9.1%
|
15.2%
|
|
3. Internal Failure Cost
|
503
|
368
|
|
% of total Quality Cost
|
36.9%
|
42.5%
|
|
Total Internal Quality Cost (1+2+3)
|
672
|
607
|
|
% of total Quality Cost
|
49.3%
|
70.0%
|
|
4.External Quality Cost
|
691
|
259
|
|
% of total Quality Cost
|
50.7%
|
29.9%
|
|
Total Quality Cost
|
1,363
|
866
|
|
Total Product Cost
|
22.168
|
23,462
|
|
% Total Quality Cost to Total Product Cost
|
6.1%
|
3.7%
|
Question 1. For each of the four quality cost areas, explain what types of costs are included and how those costs have changed between 2000 and 2002.
Question 2. Assess overall quality performance in 2002 compared with 2000. What do you suppose has caused the changes observed in quality costs?