Millan& Co. makes electronic components. Mike Millan, the president, recently instructed Vice President Steve Bensen to develop a total quality control program: “If we don’t at least match the quality improvements our competitors are making,” he told Bensen, “we’ll soon be out of business.” Bensen began by listing various “costs of quality” that Millan incurs. The first six items that came to mind were as follows:
• Costsof reworking defective components after discovery by company inspectors
• Costs of inspecting components in one of Millan& Co.’s production processes
• Salaries of engineers who are designing components to withstand electrical overloads
• Costs incurred by Millan& Co.’s customer representatives traveling to customer sites to repair defective products
• Lostprofits from lost sales due to reputation for less- than- perfect products
• Costs of electronic components returned by customers
Classify eachitem as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost