Decker & Co. makes electronic components. Chris Decker, the president, recently instructed Vice President Jim Bruegger to develop a total quality control program. “If we don’t at least match the quality improvements our competitors are making,” he told Bruegger, “we’ll soon be out of business.” Bruegger began by listing various “costs of quality” that Decker incurs. The first six items that came to mind were:
a. Costs incurred by Decker customer representatives traveling to customer sites to repair defective products, $13,500.
b. Lost profits from lost sales due to reputation for less-than-perfect products, $35,000.
c. Costs of inspecting components in one of Decker’s production processes, $22,500.
d. Salaries of engineers who are redesigning components to withstand electrical overloads, $90,000.
e. Costs of reworking defective components after discovery by company inspectors, $25,000.
f. Costs of electronic components returned by customers, $55,000.
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.