Reed Engineering Ltd is a valve manufacturing company that was established two decades ago. The valves are high-end products. The company used to manufacture a variety of valves to cater to the needs of different customers. Over the years, several competitors entered the field and Reed started facing tough competition in the marketplace. The situation forced Reed to look at reducing operating costs. With the help of the employees, the management identified three models of valves, which were felt to have the greatest opportunity for savings. You have been invited as a consultant to look at the following cost data, analyse and prepare a report for the management.

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Quality Cost Statement by Product Line Quality Cost Prevention Appraisal Internal failure External failure Total sales Total labour cost No. of machines Product A 5,698 37,676 119,107 133,168 8,165,000 5,800 71 Product B 1,569 10,384 60,876 12,625 1,750,000 5,650 14 Product C 1,908 9,206 63,523 15,755 90,392 4,585 14