Question

Clearsoundmanufactures high- quality speakers. Suppose Clearsound is considering spending the following amounts on a new quality program: Additional 20
minutes of testing for each speaker............................................... $ 604,000
Negotiating with and training suppliers to obtain higher- quality
materials and on- time delivery.................................................... $ 550,000
Redesigning the speakers to make them easier to manufacture........ $ 1,405,000

Clearsound expectsthis quality program to save costs as follows:
Reduced warrantyrepair costs.................................................. $ 208,000
Avoid inspection of raw materials................................................. $ 404,000
Rework avoided because of fewer defective units........................ $ 656,000

It alsoprogram to avoid lost profits from the following:
Lost salesdue to disappointed customers....................................................$ 858,000
Lost production time due to rework.............................................................$ 309,000

1. Classifyeach of these costs into one of the four categories of quality costs (prevention, appraisal, internal failure, external failure).
2. Should Clearsound implement the quality program? Give your reasons.



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  • CreatedAugust 27, 2014
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