Carrie Lee, the president of Lee Enterprises, was concerned about the results of her companys new quality

Carrie Lee, the president of Lee Enterprises, was concerned about the results of her company’s new quality control efforts. “Maybe the emphasis we’ve placed on upgrading our quality control system will pay off in the long run, but it doesn’t seem to be helping us has seen its market share decline in recent years because of increased foreign competition. An intensive effort to strengthen the quality control system was initiated a year ago (on January 1, 2011) in the hope that better quality would strengthen the company’s competitive position and reduce warranty and servicing costs. The following costs (in thousands) relate to quality and quality control over the last two years:

Required

1. Prepare a spreadsheet that produces a cost-of-quality (COQ) report for both 2010 and 2011. Carry percentage computations to two decimal places.

2. Use your spreadsheet to prepare a histogram showing the distribution of the various quality costs by category. (Note: Your histogram should include results for both 2010 and 2011.)

3. Prepare a written evaluation to accompany the reports you have prepared in requirements 1 and 2. This evaluation should discuss the distribution of quality costs in the company, changes in this distribution that you detect have taken place over the last year, and any other information you believe would be useful to management.

4. A member of the management team believes that employees will be more conscientious in their work if they are held responsible for mistakes. He suggests that workers should do rework on their own time and that they also should pay for disposal of defective units and the cost of scraps. The proposal estimates that the firm can save another $400,000 in quality costs and the employees are less likely to make as many errors. Should the firm implement the proposal? Why or why not?

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2010 | 2011 $420 $140 Warranty repairs Rework labor 140 200 Supplies used in testing Depreciation of testing equipment 22 34 Warranty replacements 60 18 Field servicing 180 120 Inspection 76 120 Systems development 64 106 Disposal of defective products 54 76 Net cost of scrap 86 124 Product recalls 340 82 Product testing 98 160 Statistical process control 74 Quality engineering 56 80 4.