X Data Table Predicted Reduction in Activity Units Predetermined Overhead Allocation Rate per Unit Activity 400 $ 42 400 25 Inspection of incoming raw materials Inspection of finished goods Number of defective units discovered in-house Number of defective units discovered by customers 1,000 52 250 68 Lost sales due to dissatisfied customers 125 101 Stella, Inc. is using a costs-of-quality approach to evaluate design engineering efforts for a new skateboard. Stella's senior managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activities over the two-year life of the skateboards follow. Also shown are the predetermined overhead allocation rates for each activity. |(Click the icon to view the information.) Read the requirements. 400 $ 42 400 25 Inspection of incoming raw materials Inspection of finished goods Number of defective units discovered in-house Number of defective units discovered by customers 1,000 52 250 68 Lost sales due to dissatisfied customers 125 101 Total predicted quality cost savings Requirement 2. Stella spent $103,000 on design engineering for the new skateboard. What is the net benefit of this "preventive" quality activity? The net benefit of the "preventive" quality activity is What major difficulty would Stella's managers have in implementing this costs-of-quality approach? ovement? Measuring the cost of engineering is difficult. Measuring the cost of inspection activities is difficult. E Measuring the cost of quality related activities is difficult. ext question. Focus only on financial measures of quality. a Monitor competitors' measures of quality and continuously try to improve them. Monitor nonfinancial measures of quality and continuously try to improve them. Requirement 3. What major difficulty would Stella's managers have in implementing this costs-of-quali What major difficulty would Stella's managers have in implementing this costs-of-quality approach? What alternative approach could they use to measure quality improvement? X Data Table Predicted Reduction in Activity Units Predetermined Overhead Allocation Rate per Unit Activity 400 $ 42 400 25 Inspection of incoming raw materials Inspection of finished goods Number of defective units discovered in-house Number of defective units discovered by customers 1,000 52 250 68 Lost sales due to dissatisfied customers 125 101