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.