Check my workCheck My Work button is now enabled

Item 8

Item 8 3.16 points

Advanced Technologies (AT) produces two compression machines that are popular with manufacturers of plastics: no. 165 and no. 172. Machine no. 165 has an average selling price of $29,000, whereas no. 172 typically sells for approximately $27,000. The company is very concerned about quality and has provided the following information:

	No. 165			No. 172
Number of machines produced and sold		140			170
Warranty costs:
Average repair cost per unit	$	850		$	320
Percentage of units needing repair		75	%		10	%
Reliability engineering at $100 per hour		1,550	hours		1,950	hours
Rework at AT's manufacturing plant:
Average rework cost per unit	$	1,850		$	1,550
Percentage of units needing rework		30	%		30	%
Manufacturing inspection at $40 per hour		270	hours		450	hours
Transportation costs to customer sites to fix problems	$	28,500		$	14,000
Quality training for employees	$	34,000		$	49,500

Required: 1. Classify the preceding costs as prevention, appraisal, internal failure, or external failure. 2-a. Using the classifications in requirement 1, compute AT's quality costs for machine no. 165 in dollars and as a percentage of sales revenues. 2-b. Using the classifications in requirement 1, compute AT's prevention, appraisal, internal failure, and external failure costs as a percentage of total quality costs. 3-a. Using the classifications in requirement 1, compute AT's quality costs for machine no. 172 in dollars and as a percentage of sales revenues. 3-b. Using the classifications in requirement 1, compute AT's prevention, appraisal, internal failure, and external failure costs as a percentage of total quality costs. 4. Is the company "investing its quality expenditures differently for the two machines?