Exercises:

1. S4-16 (Chapter 4): Quality initiative decision

S4-15 Classifying costs of quality (Learning Objective 5)

Classify each of the following quality-related costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.

Warranty repairs

Legal fees from customer lawsuits

Training employees

Cost incurred in producing and disposing of defective units

Lost productivity due to machine breakdown

Inspecting products that are halfway through the production process

Inspecting incoming raw materials

Repairing defective units found during inspection

Incremental cost of using a higher-grade raw material

Redesigning the production process

S4-16 Quality initiative decision (Learning Objective 5)

Boswell manufactures high-quality speakers. Suppose Boswell is considering spending the following amounts on a new quality program:

Additional 20 minutes of testing for each speaker ......... $ 607,000 Negotiating with and training suppliers to obtain higher-quality $ 300,000 materials and on-time delivery ...... . . . . ...... Redesigning the speakers to make them easier to manufacture ..... $1,402,000