- Data Table Requirements Predicted Reduction in Activity Units Predetermined Overhead Allocation Rate per Unit 410 $ 39 1. Calculate the predicted quality cost savings from the design engineering work. 2. Sherri spent $102,000 on design engineering for the new skateboard. What is the net benefit of this "preventive" quality activity? 3. What major difficulty would Sherri's managers have in implementing this costs-of-quality approach? What alternative approach could they use to measure quality improvement? 410 25 Activity Inspection of incoming raw materials Inspection of finished goods Number of defective units discovered in-house Number of defective units discovered by customers Lost sales due to dissatisfied customers 1,000 54 275 68 100 101 Print Done Print Done Total predicted quality cost savings Sherri, Inc. is using a costs-of-quality approach to evaluate design engineering efforts for a new skateboard. Sherri's senior managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activities over the two-year life of the skateboards follow. Also shown are the predetermined overhead allocation rates for each activity. (Click the icon to view the information.) Read the requirements. Requirement 1. Calculate the predicted quality cost savings from the design engineering work. Predicted Predetermined Reduction in Overhead Allocation Activity Units Rate per Unit 410 $ 39 Predicted Quality Cost Savings Inspection of incoming raw materials 410 25 Inspection of finished goods Number of defective units discovered in-house Number of defective units discovered by customers 1,000 54 275 68 Lost sales due to dissatisfied customers 100 101 Total predicted quality cost savings Requirement 2. Sherri spent $102,000 on design engineering for the new skateboard. What is the net benefit of this "preventive" quality activity? The net benefit of the "preventive" quality activity is Sherri, Inc. is using a costs-of-quality approach to evaluate design engineering efforts for a new skateboard. Sherri's senior managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activities over the two-year life of the skateboards follow. Also shown are the predetermined overhead allocation rates for each activity. E: (Click the icon to view the information.) Read the requirements. Number of defective units discovered by customers 275 68 Lost sales due to dissatisfied customers 100 101 Total predicted quality cost savings Requirement 2. Sherri spent $102,000 on design engineering for the new skateboard. What is the net benefit of this "preventive" quality activity? The net benefit of the "preventive" quality activity is Requirement 3. What major difficulty would Sherri's managers have in implementing this costs-of-quality approach? What alternative approach could they use to measure quality improvement? What major difficulty would Sherri's managers have in implementing this costs-of-quality approach? What alternative approach could they use to measure quality improvement