Managers at Walla-Walla LTD want to determine the company’s cost of quality. The following information has been gathered from the records for August 2013:
Defective units ............. 6,000
Units reworked ............. 1,200
Defective units returned ........... 400
Appraisal costs .............. $ 17,500
Cost per unit for rework ........... $ 18
Prevention costs ............... $ 85,000
Profit per good unit produced and sold ..... $ 85
Profit per defective unit sold ......... $43
Cost per unit for customer returns ....... $14
Cost of warranty work .......... $9,000
Compute the following:
a. Lost profits from selling defective work.
b. Total costs of failure
c. Total quality cost