Timmer Meats is a large meat processor in the southeastern United States. The company’s most recent year’s sales totaled $50 million. Over the last several years, the company has had an unfortunate number of quality problems, which threatens the company’s existence. Webb Timmer, the company’s president, asked the company’s controller and quality control manager to accumulate data related to product quality. These two individuals prepared the following data for Webb:
Warranty claims .............. $ 120,000
Food poisoning liability lawsuits ...... 200,000
Quality training ............. 305,000
Inspection of incoming meat ........ 900,000
Statistical process control ......... 650,000
Spoilage and waste ............ 900,000
Product quality audits ........... 475,000

Required
A. Compute total prevention costs.
B. Compute total appraisal costs.
C. Compute total internal failure costs.
D. Compute total external failure costs.
E. Webb is considering spending more on inspections. What is the likely impact on other failure costs? What do you recommend?