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Darrel & Co. makes electronic components. Chris Darrel, the president, recently instructed Vice President Jim Bruegger to develop a total quality control program. 鈥淚f we don鈥檛 at least match the quality improvements our competitors are making,鈥� he told Bruegger, 鈥渨e鈥檒l soon be out of business.鈥� Bruegger began by listing various 鈥渃osts of quality鈥� that Darrel incurs. The first six items that came to mind were:

a. Costs incurred by Darrel customer representatives traveling to customer sites to repair defective products, \(13,000.

b. Lost profits from lost sales due to reputation for less-than-perfect products, \)35,000.

c. Costs of inspecting components in one of Darrel鈥檚 production processes, \(40,000.

d. Salaries of engineers who are redesigning components to withstand electrical overloads, \)65,000.

e. Costs of reworking defective components after discovery by company inspectors, \(50,000.

f. Costs of electronic components returned by customers, \)70,000.

Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost. Then determine the total cost of quality by category.

Step by step solution

01

Prevention Cost

From the given list, followings are the prevention cost and their total 鈥�

S.No.	Cost	Amount
d.	Salaries of engineers who are redesigning components to withstand electrical overloads	$65,000
	Total	$65,000

02

Appraisal Cost

Following are the appraisal cost and their total from the given list 鈥�

S.No.	Cost	Amount
c.	Costs of inspecting components in one of Darrel鈥檚 production processes.	$40,000
	Total	$40,000

03

Internal Failure Cost

S.No.	Cost	Amount
e.	Costs of reworking defective components after discovery by company inspectors.	$50,000
	Total	$50,000

04

External Failure Cost

S.No.	Cost	Amount
a.	Costs incurred by Darrel customer representatives traveling to customer sites to repair defective products.	$13,000
b.	Lost profits from lost sales due to the reputation for less-than-perfect products.	$35,000
f.	Costs of electronic components returned by customers.	$70,000
	Total	$118,000

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