Question

Clarke, Inc. manufactures door panels. Suppose Clarke is considering spending the following amounts on a new total quality management (TQM) program:
Strength-testing one item from each batch of panels ............... $ 62,000
Training employees in TQM ....................... 25,000
Training suppliers in TQM ........................ 38,000
Identifying suppliers who commit to on- time delivery of perfect-quality materials ... 56,000
Clarke expects the new program would save costs through the following:
Avoid lost profits from lost sales due to disappointed customers ......... $ 94,000
Avoid rework and spoilage ....................... 60,000
Avoid inspection of raw materials ..................... 55,000
Avoid warranty costs .......................... 20,000

Requirements
1. Classify each cost as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.
2. Should Clarke implement the new quality program? Give your reason.



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  • CreatedJanuary 16, 2015
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