Meagher Solutions Inc. manufactures memory chips for personal computers. An activity analysis was conducted, and the following activity costs were identified with the manufacture and sale of memory chips:

Question Content Area

a. Identify the cost of quality classification for each activity.

Quality Activities	Activity Cost				Quality Cost Classification
Correct shipment errors		$150,000			AppraisalExternal failureInternal failurePrevention
Disposing of scrap		95,000			AppraisalExternal failureInternal failurePrevention
Emergency equipment maintenance		125,000			AppraisalExternal failureInternal failurePrevention
Employee training		50,000			AppraisalExternal failureInternal failurePrevention
Final inspection		80,000			AppraisalExternal failureInternal failurePrevention
Inspecting incoming materials		60,000			AppraisalExternal failureInternal failurePrevention
Preventive equipment maintenance		40,000			AppraisalExternal failureInternal failurePrevention
Processing customer returns		90,000			AppraisalExternal failureInternal failurePrevention
Scrap reporting		45,000			AppraisalExternal failureInternal failurePrevention
Supplier development		15,000			AppraisalExternal failureInternal failurePrevention
Warranty claims		250,000			AppraisalExternal failureInternal failurePrevention
Total		$1,000,000

Question Content Area

b. Prepare a cost of quality report. Assume that the sales for the period were $4,000,000. If required, round percents to one decimal place.

Meagher Solutions Inc. Cost of Quality Report

Quality Cost Classification	Quality Cost	Percent of Total Quality Cost	Percent of Total Sales
Prevention	$fill in the blank ebfc3705cff2f8c_1	fill in the blank ebfc3705cff2f8c_2%	fill in the blank ebfc3705cff2f8c_3%
Appraisal	fill in the blank ebfc3705cff2f8c_4	fill in the blank ebfc3705cff2f8c_5%	fill in the blank ebfc3705cff2f8c_6%
Internal failure	fill in the blank ebfc3705cff2f8c_7	fill in the blank ebfc3705cff2f8c_8%	fill in the blank ebfc3705cff2f8c_9%
External failure	fill in the blank ebfc3705cff2f8c_10	fill in the blank ebfc3705cff2f8c_11%	fill in the blank ebfc3705cff2f8c_12%
Total	$fill in the blank ebfc3705cff2f8c_13	fill in the blank ebfc3705cff2f8c_14%	fill in the blank ebfc3705cff2f8c_15%

Question Content Area

c. The category with the fewest number of quality activities is

internal failuresexternal failuresprevention costsappraisal costs

. Nearly fifty percent of the quality activity costs are

internal failuresexternal failuresprevention costsappraisal costs

. The highest single cost is warranty claims, which is a(n)

internal failureexternal failureprevention costappraisal cost

. Disposing of scrap, emergency equipment maintenance, and scrap reporting are all

internal failuresexternal failuresprevention costsappraisal costs

.