Year 2012 2013 2014 2015 2016

Quality costs (000s)

Prevention 3.2 10.7 28.3 42.6 50
Appraisal 26.3 29.2 30.6 24.1 19.6
Internal failure 39.1 51.3 48.4 35.9 32.1
External Failure 118.6 110.5 105.2 91.3 65.2
Total Quality costs 187.2 201.7 212.5 193.9 166.9
Accounting measures (000s)
Sales 2700.6 2690.1 2705.3 2310.2 2880.7
Manufacturing cost 420.9 423.4 424.7 436.1 435.5

Year 2012 2013 2014 2015 2016

Total Failure cost/ Total Quality 84.24% 80.22% 72.28% 65.60% 58.30%
cost
Prevention cost/ Total costs 1.71% 5.30% 13.32% 21.97% 29.96%
Appraisal cost/ Total costs 14.05% 14.48% 14.40% 12.43% 11.74%
Quality sales index 0.06931793 0.07497863 0.07854951 0.08393213 0.05793731
Quality sales index as a percent 6.93% 7.50% 7.85% 8.39% 5.79%
Quality cost index 0.44476123 0.47638167 0.50035319 0.44462279 0.38323766
Quality cost index as a percent 44.48% 47.64% 50.04% 44.46% 38.32%
a) The company’s total failure costs as a percentage of total quality costs are calculated above. The trend is a
decrease in the percentage of total failure cost over total quality cost. There are several potential reasons for
this trend, but it is most likely due to increased spending in prevention. Increased quality assurance monitoring
would reduce the number of defective products released. As more was spent on prevention, quality would be
increased, and failure costs would decrease as a result.

b) The company is spending more, as a percentage of total quality costs, on prevention over the time period. They
are also spending less on appraisal over the time period. The company’s quality strategy appears to focus on
increased prevention, which would allow them to spend less in appraisal.

c) The effectiveness of the company’s quality management program can be assessed with these indices. The
indices relay that the total quality cost has remained relatively stable over the time period examined. The total
cost aside from the indices was relatively constant as well.

d) Examples of various costs:

a. Prevention – costs associated with designing parkas with quality characteristics (eg good materials that
will last), cost of training programs for employees, information costs associated with quality reports
b. Appraisal – costs associated with inspecting and testing the materials used at various stages of
production, cost of maintaining the equipment that is used to test the products, cost of time for
operators that gather the data for product quality testing
c. Internal failure – scrap costs from poor-quality parkas that must be discarded, rework costs associated
with fixing defective parkas, process failure costs which are those that are associated with determining
why the production process is producing poor-quality items
d. External failure – customer complaint costs which are those associated with investigating and
responding to a customer complaint from a poor-quality product, product return costs, warranty claim
costs

a) Yield = 300 (.87)(.91)(.94)(.93)(.93)(.96) = 185 good-quality cabinets

b) 300 = (.87)(.91)(.94)(.93)(.93)(.96)(Input)  300 = .617911 (input)  input = 300/(.617911) = 486
weekly product input