Tiffany Lamp Company produces stained glass lamps appropriate for home and office use. The company expects sales to total approximately $50 million for the current year. Tiffany’s management team has become increasingly concerned about a perception among some customers that quality is not particularly important to the company. Consequently, management recently implemented a quality improvement program and after several months accumulated the following data:
Warranty claims ........... $ 60,000
Rework costs ............. $200,000
Quality training ............ $305,000
Inspection of incoming materials ...... $900,000
Statistical process control ......... $400,000
Scrap costs .............. $100,000
Product quality audits ......... $250,000

Required
A. What are total prevention costs?
B. What are total appraisal costs?
C. What are total internal failure costs?
D. What are total external failure costs?
E. Based on your calculations, is there a basis for the perception that quality is not important to Tiffany Lamp Company?