Thermal Heat Industries Inc. (THI) manufactures hot water tanks. Two of their top-of-the-line products are the Aestus
Question:
Thermal Heat Industries Inc. (THI) manufactures hot water tanks. Two of their top-of-the-line products are the Aestus and the Fuoco. The industrial engineer that has overseen the design and implementation of the manufacturing of these two products would like a quality report.
You have gathered the following information:
Aestus | Fuoco | ||
Units manufactured and sold | 5,000 | 2500 | |
Selling price per unit | $1,920 | $1,440 | |
Variable costs per unit | $1,152 | $768 | |
Hours spent on quality design | 2,800 | 500 | |
Testing and inspection hours per unit | 1 | 0.5 | |
Percentage of units reworked in the plant | 4% | 10% | |
Rework costs per hot water tank | $410 | $385 | |
Percentage of units under warranty repaired at customer site | 3% | 8% | |
Warranty repair costs per hot water tank | $480 | $430 | |
Estimated lost sales (in units) from poor quality | 160 |
Labour rates:
- Design - $90 per hour
- Testing - $48 per hour
Required:
- Prepare a cost of quality report for THI. The report should list all cost items categorized by type of quality cost, including percentages in relation to revenues for each product and category. (4 marks)
Aestus | Fuoco | |||
Quality item | Quality cost | % | Quality cost | % |
Prevention | ||||
Appraisal | ||||
Internal failure | ||||
External failure | ||||
Total |
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A First Course in Differential Equations with Modeling Applications
ISBN: 978-1305965720
11th edition
Authors: Dennis G. Zill