Question: Lilly Inc is using a costs of quality approach to evaluate design

Lilly Inc. is using a costs-of-quality approach to evaluate design engineering efforts for a new skateboard. Lilly’s senior managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activities over the two-year life of the skateboards follow. Also shown are the predetermined overhead allocation rates for each activity.
1. Calculate the predicted quality cost savings from the design engineering work.
2. Lilly spent $100,000 on design engineering for the new skateboard. What is the net benefit of this “preventive” quality activity?
3. What major difficulty would Lilly’s managers have in implementing this costs-of- quality approach? What alternative approach could they use to measure quality improvement?

View Solution:

Sale on SolutionInn
  • CreatedJune 15, 2015
  • Files Included
Post your question