Wharfedale manufactures high-quality speakers. Suppose Wharfedale is considering spending the following amounts on a new quality program:

Additional 20 minutes of testing for each speaker....................................... $ 600,000

Negotiating with and training suppliers to obtain

higher-quality materials and on-time delivery............................................. 300,000

Redesigning the speakers to make them

easier to manufacture...................................................... ....... 1,400,000

Wharfedale expects this quality program to save costs as follows:

Reduced warranty repair costs.............................................................. $200,000

Avoid inspection of raw materials......................................................... 400,000

Rework avoided because of fewer defective units.................................. 650,000

It also expects this program to avoid lost profits from the following:

Lost sales due to disappointed customers.............................................. $850,000

Lost production time due to rework...................................................... 300,000

1. Classify each of these costs into one of the four categories of quality costs (prevention, appraisal, internal failure, external failure).

2. Should Wharfedale implement the quality program? Give your reasons.