Jessica Tolmy, Costen€™s president, decided to devote more resources to the improvement of product quality after learning that her company had been ranked fourth in product quality in a 2010 survey of cell phone users. Costen€™s quality-improvement program has now been in operation for two years, and the cost report shown below has recently been issued.

REQUIRED
1. For each period, calculate the ratio of each COQ category to revenues and to total quality costs.
2. Based on the results of requirement 1, would you conclude that Costen€™s quality program has been successful? Prepare a short report to present your case.
3. Based on the 2013 survey, Jessica Tolmy believed that Costen had to improve product quality. In making her case to Costen management, how might Tolmy have estimated the opportunity cost of not implementing the quality-improvement program?

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Semi-Annual COQ Report, Costen Inc. (in thousands) 6/30/2011 12/31/201 6/30/2012 12/31/2012 Prevention costs Machine maintenance S 440 20 50 510 440 100 214 754 S 390 50 210 650 330 40 200 570 Supplier training Design reviews Total prevention costs Appraisal costs Incoming inspections Final testing 108 332 440 123 332 455 90 293 383 63 203 266 Total appraisal costs Internal ailure costs Rework 231 124 355 202 116 318 165 112 67 179 cra Total internal failure costs 236 External failure costs Warranty repairs Customer returns 165 570 735 $%2,040 85 547 632 2,159 72 264 336 $1.605 68 188 256 S1,271 Total external failure costs Total quality costs Total revenues %8,240 $9,080 S9,300 $9,020