ATC 5-4 Writing Assignment Assessing a strategy to control quality cost Lucy Sawyer, who owns and operates Sawyer Toy Company, is a perfectionist. She believes literally in the "zero-defects" approach to quality control. Her favorite saying is, "You can't spend too much on quality." Even so, in Year 4 her company experienced an embarrassing breach of quality that required the national recall of a defective product. She vowed never to repeat the experience and instructed her staff to spend whatever it takes to ensure that products are delivered free of defects in Year 5. She was somewhat disappointed with the Year 5 year-end quality cost report shown here. Year 4 Year 5 Prevention costs $120,000 $ 80,000 Appraisal costs 240,000 430,000 Internal failure costs 140,000 560,000 External failure cost Total 320,000 210,000 $820,000 $1,280,000 Although external failure costs had declined, they remained much higher than expected. The in- creased inspections had identified defects that were corrected, thereby avoiding another recall; how- ever, the external failure costs were still too high. Ms. Sawyer responded by saying. "We will have to double our efforts." She authorized hiring additional inspectors and instructed her production supervi- sors to become more vigilant in identifying and correcting errors. Required Assume that you are the chief financial officer (CFO) of Sawyer Toy Company. Ms. Sawyer has asked you to review the company's approach to quality control. Prepare a memo to her that evaluates the ex- isting approach, and recommend changes in expenditure patterns that can improve profitability as well as increase the effectiveness of the quality control system.