The CEO of Oakville Machine Parts (OMP) is concerned with the quality of its products and the
amount of resources currently spent on customer returns. The CEO would like to analyze the
costs incurred in conjunction with the quality of the product.
The following information was collected from various departments within the company:
| Litigation on product liability claims | 350,000 |
| Inspecting 10% of final products | 10,000 |
| Production loss due to machine breakdowns | 90,000 |
| Inspection of raw materials | 10,000 |
Required:
A. Complete the Cost of Quality Report.
B. Do any additional subjective costs appear to be missing from the report?
C. What can be learned from the report?
| | Costs
Incurred | Total Costs
of Quality | Percentage of
Total Costs
of Quality |
| Prevention Costs: | | | |
| Personnel training | | | |
| Total prevention costs | | | |
| Appraisal Costs: | | | |
| Inspecting raw materials | | | |
| Inspecting 10% of final products | | | |
| Total appraisal costs | | | |
| Internal Failure Costs: | | | |
| Rework | | | |
Production loss due to
machine breakdown | | | |
| Total internal failure costs | | | |
| External Failure Costs: | | | |
| Litigation costs from product liability claims | | | |
| Warranty return costs | | | |
| Total external failure costs | | | |
| Total costs of quality | | | |
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