Question

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.



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  • CreatedJanuary 16, 2015
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