The following quality cost report came from the records of Nelson Company.

Required
a. Explain the strategy that Nelson Company initiated to control its quality costs.
b. Indicate whether the strategy was successful or unsuccessful in reducing quality costs.
c. Explain how the strategy likely affected customer satisfaction.

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2011 2010 Amount Percentage Amount Percentage Prevention costs Engineering and design Training and education Depreciation on prevention equipment Incentives and avwards $ 58,000 13.74% 3.86% $136,000 34,000 58,000 88,000 3.43 12,000 30,000 40,000 0.80 5.86 1.99 8.89 2.66 Total prevention Appraisal costs Inventory inspection Reliability testing Testing equipment (depreciation) Supplies Total appraisal 316,000 31.92% 9.31% 140,000 50,000 32,000 5.05 50,000 30,000 24,000 16,000 3.32 3.23 1.99 22,000 14,000 2.22 1.60 1.41 1.06 11.92% 7.98% 118,000 120,000 Internal failure costs 48,000 98,000 24,000 80,000 220,000 40,000 24,000 4.85 5.32 Scrap Repair and rework Downtime Reinspection 14.63 9.90 2.42 2.66 8,000 0.81 1.60 Total internal failure 178,000 17.98% 364,000 24.20% External failure cost Warranty repairs and replacement Freight Customer relations 220,000 48,000 56,000 54,000 22.22 520,000 100,000 120,000 140,000 34.57 6.65 4.85 5.66 7.98 Restocking and packaging 5.45 9.31 38.18% 100.00% Total external failure 378,000 880,000 58.51% Grand total 100.00% $990,000 $1,504,000