Please help me answer this exercise for Total Quality Management.

For this exercise, the cost of quality will be calculated as a percentage of sales. This scenario is before several quality improvements were implemented. The cost of quality directly impacts an organizations profitability and competitiveness. It is imperative that all organizations measure their cost of quality and continually improve quality to operate efficiently and effectively.

Scenario 1:

You are a local furniture manufacturer in a city in Canada. Your annual sales are $1,000,000. You employ 25 people including an Inspector and a Quality Assurance Supervisor who maintain the integrity of the Quality Management System. Of late, your team has expressed concerns regarding product quality. In particular, one of the most popular leather recliners is repeatedly being returned for rework and repair. This product sells for $2,500.00 and represents 25% of your annual sales. Customer complaints have increased, and overtime is now being used to keep up with the warranty claims and regular production. The team has put together the following annualized data regarding the cost of quality:

32% of the recliners shipped have been returned for warranty repair

Costs for managing these failures include:

Inspector trained on Quality Tools 20 hours @ $125.00 per hour

Equipment inspection monthly 1 hour @ $95.00 per hour, quarterly maintenance at $1,000/quarter

Inspection - $11,250

Returned shipping costs - an average of $75.00 per recliner

Warranty paperwork - $50.00/claim

Costs of handling complaints 10% of Customer Service Coordinators time salary $45,000 per year

Cost of fixing rejected items average $140/recliner

1. Calculate the number of recliners returned for warranty. Using the cost of managing these failures, determine which costs are associated with prevention, appraisal, internal and external failure, enter these in the table below, and calculate the cost of quality for this product line.

Number of defective recliners

	Cost Description	Associated Cost	Total Cost
Cost of Prevention
Cost of Appraisal
Cost of Internal Failure
Cost of External Failure
		Total Quality Costs
		Total Quality Cost % of Sales

Scenario 2:

1 year later you have implemented many improvements and there is a considerable reduction in the cost of quality for the recliners. The number of warranty claims has reduced by 55%.

Costs for managing these failures include:

Supplier surveys, including travel 2 surveys @ $800.00 per survey

Assembly Technician training 20 hours per Technician (10 technicians) @ $45.00/hour

Equipment inspection monthly 1 hour @ $95.00 per hour, quarterly maintenance at $1,000/quarter

Inspector - $2,250

Returned shipping costs - average of $75.00 per recliner

Warranty paperwork - $50.00/claim

Costs of handling complaints 3% of Customer Service Coordinators time salary $45,000 per year

Cost of fixing rejected items average $125/recliner

1. Calculate the number of recliners returned for warranty. Using the cost of managing these failures, determine which costs are associated with prevention, appraisal, internal and external failure, enter these in the table below, and calculate the new cost of quality for this product line.

Number of defective recliners

	Cost Description	Associated Cost	Total Cost
Cost of Prevention
Cost of Appraisal
Cost of Internal Failure
Cost of External Failure
		Total Quality Cost
		Total Quality Cost % of Sales

What are 2 of the key differences between the two cost matrices: ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________