Kane manufactures high- quality speakers. Suppose Kane is considering spending the following amounts on a new quality program:

Additional 20 minutes testing for each speaker ..............$ 620,000

Negotiating and training suppliers to obtain higher-quality materials

and on-time delivery ........................410,000

Redesigning the speakers to make them easier to manufacture ....... 1,350,000

Kane expects this quality program to save costs as follows:

Reduce warranty repair costs ..................... $ 225,000

Avoid inspection of raw materials ................... 540,000

Avoid rework because of fewer defective units ............ 800,000

It also expects this program to avoid lost profits from the following:

Lost sales due to disappointed customers ............... $ 940,000

Lost production time due to rework ................. 278,000

Requirements

1. Classify each of these costs into one of the four categories of quality costs ­( prevention, appraisal, internal failure, external failure).

2. Should Kane implement the quality program? Give your reasons.