Chihooli manufactures radiation-shielding glass panels. Suppose Chihooli is considering spending the following amounts on a new TQM program:
Strength-testing one item from each batch of panels.................................. $65,000
Training employees in TQM...................................................................... 30,000
Training suppliers in TQM .................................................................... 40,000
Identifying preferred suppliers who commit to
on-time delivery of perfect quality materials................................................. 60,000
Chihooli expects the new program to save costs through the following:
Avoid lost profits from lost sales due to disappointed customers............. $90,000
Avoid rework and spoilage...................................................................... 55,000
Avoid inspection of raw materials........................................................... 45,000
Avoid warranty costs .............................................................................. 15,000
Requirements
1. Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.
2. Should Chihooli implement the new quality program? Give your reason.
Exercises (Group B)