Osborn, Inc., produces cell phone equipment. Amanda Westerly, Osborn's president, implemented a quality-improvement program that has now been in operation for 2 years. The cost report shown here 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 Osborn's quality program has been successful? Prepare a short report to present your case.
3. Based on the 2015 survey, Amanda Westerly believed that Osborn had to improve product quality. In making her case to Osborn management, how might Westerly have estimated the opportunity cost of not implementing the quality-improvement program?

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Semi-Annual COQ Report, Osborn, Inc. (in thousands) 6/30/2016 12/31/2016 6/30/2017 12/31/2017 Prevention costs S 440 45 198 S 290 35 196 521 S 480 Machine maintenance Supplie training Design reviews $ 480 90 218 788 21 Total prevention costs 531 Appraisal costs 109 Incoming inspections Final testing 124 327 451 89 302 391 Total appraisal costs 436 Internal failure costs Rework Scrap 166 206 124 115 65 180 127 Total internal failure costs External failure costs Warranty repairs Customer returns 182 594 70 263 510 186 Total external failure costs Total quality costs Total revenues $2,096 $8,220 $2,168 $9,180 $1,641 $9,260 $1,211 $9,050