Millan & Co. makes electronic components. Michelle Millan, the president, recently instructed Vice President Pablo Tapia to develop a total quality control program: “If we don’t at least match the quality improvements our competitors are making,” she told Tapia, “we’ll soon be out of business.” Tapia began by listing various “costs of quality” that Millan incurs. The first six items that came to mind are listed below. Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.
1. Costs of electronic components returned by customers
2. Costs incurred by Millan & Co.’s customer representatives travelling to customer sites to repair defective products
3. Lost profits from lost sales due to reputation for less-than-perfect products
4. Costs of inspecting components in one of Millan & Co.’s production processes
5. Salaries of engineers who are designing components to withstand electrical overloads
6. Costs of reworking defective components after discovery by company inspectors