Quality Costs Answer PDF

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Answers to the Quality of Cost assgiment ...

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Quality-Costs 1) Briefly describe the 4 categories of Quality Costs and how this analysis can be beneficial

2) Case example: Backwoods Canadian, Inc. produces expensive water pumps. The company implemented a total quality management program in 1998. Following are quality-related accounting data that have been accumulated for the 5-year period 1998-2002. Quality Costs ($000s) Years 1998 1999 2000 2001 2002 Prevention Appraisal Sub-total Prevent+ Appraisal:

3.2 26.3

28.3 30.6

42.6 24.1

50.0 19.6

51.3 110.5

48.4 105.2

35.9 91.3

32.1 65.2

29.5

Internal Failure 39.1 External Failure 118.6 Sub-total Failure of Internal + External: 157.7 Total Quality Cost

10.7 29.2

187.2

% of Failure Cost of Total Quality Cost 84% a) Calculate the Total Quality Cost and the two subtotals (a. Prevention + Appraisal and b. Internal + External Failure Cost) in the above table. Add your calculation to the table. (It is $29.5 thousand for 1998) b) Calculate the company’s Sub total Failure Costs (Internal + External) as a percentage of Total Quality costs for each of the 5 years. Add your calculation to the table. (It is $157.7.5 thousand for 1998) c) Does there appear to be a trend to this result? If so, explain on what might have caused the trend. (It is 84% for 1998) Hint: Did the company take any specific action that affected costs? d) List 2 examples of each quality-related cost of the pumps. Prevention: Implementation of TQM program; Employee Training Appraisal: Test inspectors for pump manufacture; Equipping a test lab Internal failure: Scrap of defective WIP, Downtime External failure: Customer complaints, Returned goods...