E4-38B Classify costs and make a quality-initiative decision

(Learning Objective 5)

Christianson Corp. manufactures radiation-shielding glass panels. Suppose the company is considering spending the following amounts on a new TQM program:

Strength-testing one item from each batch of panels............................................................................................. $68,000 Training employees in TQM..................................................................................................................................... $24,000 Training suppliers in TQM........................................................................................................................................ $33,000 Identifying preferred suppliers that commit to on-time delivery of perfect quality materials................................ $55,000 The company expects the new program would save costs through the following:
Avoid lost profits from lost sales due to disappointed customers.............................. $95,000 Avoid rework and spoilage.......................................................................................... $67,000 Avoid inspection of raw materials................................................................................ $50,000 Avoid warranty costs.................................................................................................... $19,000 Requirements 1. Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.
2. Should the company implement the new quality program? Give your reason.

The company expects the new program would save costs through the following:
Avoid lost profits from lost sales due to disappointed customers.............................. $95,000 Avoid rework and spoilage.......................................................................................... $67,000 Avoid inspection of raw materials................................................................................ $50,000 Avoid warranty costs.................................................................................................... $19,000 Requirements 1. Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.
2. Should the company implement the new quality program? Give your reason.

The company expects the new program would save costs through the following:
Avoid lost profits from lost sales due to disappointed customers.............................. $95,000 Avoid rework and spoilage.......................................................................................... $67,000 Avoid inspection of raw materials................................................................................ $50,000 Avoid warranty costs.................................................................................................... $19,000 Requirements 1. Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.
2. Should the company implement the new quality program? Give your reason.