Exercise 2B: PAF Cost Analysis (5 Points). Using the solution to Exercise 1A provided below, you are to: 1) calculate the quality cost ratios and proportions for the table calculations required on the 2^nd page of this handout and 2) answer the two questions that follow. You are to type your responses in this form.

Exercise 1A: MCC Quality Cost Data Categorization Solution
Prevention Costs:
Plant Process Engineering	$ 659,221
QMS Planning	$ 304,552
Supplier Assessment (New Purchase Contracts)	$ 265,952
Corporate Process Engineering	$ 123,006
Operator Training and Certification	$ 77,205
QMS Documentation	$ 65,852
Design of Test Procedures	$ 24,456
Total Prevention Cost		$ 1,520,244
Appraisal Costs:
Supplier Monitoring (Existing Purchase Contracts)	$ 117,308
Product Line 1 Inspection	$ 59,225
Product Line 2 Inspection	$ 47,337
Inspection and Test Setup	$ 36,558
Receiving and Inspection	$ 12,000
Laboratory Acceptance Testing	$ 12,000
Total Appraisal Cost		$ 284,428
Failure Costs:
Warranty Repairs	$ 302,502
Lost Production (Labor Shortages)	$ 252,366
Lost Production (Material Shortages)	$ 106,223
Buffer Inventory Stocks	$ 47,380
Customer Adjustments	$ 31,995
Production Scrap	$ 29,875
Corrective Maintenance to Machinery	$ 23,855
Total Failure Cost		$ 794,196
Total MCC Quality Cost:
Total Quality Cost		$ 2,598,868

Note: You are submitting answers to the calculations and the two questions given on Page 2 only. Do not submit Page 1 of Exercise 1B.

Exercise 1B: PAF Cost Analysis (5 Points). Using the solution to Exercise 1A provided below, you are to: 1) calculate the quality cost ratios and percentages for the table calculations required in the table provided below, and 2) answer the two questions that follow. Make sure to double-check your decimal places used and truncate all calculations as shown in the PowerPoint notes and textbook. You are to type your responses into this form and submit it as a Word document in Canvas.

Ratio of:
Prevention to Failure Costs	$1,520,244/$794196=1.9142
Appraisal to Failure Costs	$284,428/$794196=0.3581
Prevention + Appraisal Costs to Failure Costs	($1,520,244+$284,428)/ /$794196=2.2723
Proportion (%) of:
Prevention to Total Quality Costs	($1,520,244/$ 2,598,868)*100=58.50%
Appraisal to Total Quality Costs	($284,428/$ 2,598,868)*100=10.94%
Failure to Total Quality Costs	($794,196/$ 2,598,868)*100=30.56%

For both of the following questions, I am looking for well thought out responses. Two or three sentence, non-specific responses will not receive credit. See the PAF cost analysis example posted on Canvas to better understand what is required.

1. What priorities should be placed in addressing MCCs quality costs? Make sure that you clearly state the priorities and use specific cost data to support recommendations. Generic descriptions such as lower failure costs are not sufficient. Use your ranked costs for each category, to identify the most important costs and then state what MCC can and should do?