Osborn, Inc., produces cell phone equipment. Amanda Westerly, Osborn's president, decided to devote more resources to the improvement of product quality after learning that her company had been ranked fourth in product quality in a 2010 survey of cell phone users. Osborn's quality-improvement program has now been in operation for 2 years, and the cost report shown here has recently been issued.

Required
1. For each period, calculate the ratio of each COQ category to revenues and to total quality costs.
2. Based on the results of requirement 1, would you conclude that Osborn's quality program has been successful? Prepare a short report to present your case.
3. Based on the 2010 survey, Amanda Westerly believed that Osborn had to improve product quality. In making her case to Osborn management, how might Westerly have estimated the opportunity cost of not implementing the quality-improvement program?

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Semi-Annual COQ Report, Osborn, Inc. (In thousands) 6/30/2011 12/31/2011 6/30/2012 12/31/2012 Prevention costs $ 480 $ 480 $ 440 $ 290 Machine maintenance Supplier training 21 90 45 35 Design reviews 30 218 198 196 Total prevention costs Appraisal costs 531 788 683 521 Incoming inspections 109 124 89 55 Final testing 327 327 302 202 451 Total appraisal costs 436 391 257 Internal failure costs Rework 226 206 166 115 127 124 Scrap 68 65 Total internal failure costs 353 330 234 180 External failure costs Warranty repairs 182 89 70 67 Customer returns 594 510 263 186 Total external failure costs 776 599 333 253 $1,641 $1,211 Total quality costs $2,096 $2,168 Total revenues $9,260 $9,050 $8,220 $9,180