(Control of quality costs; team activity) The following summary numbers have been taken from a quality cost report of Alabama Millworks Inc. for 1997. The firm manufactures a variety of cast-iron products.

The company is actively seeking to identify ways to reduce total quality7 costs. The company’s current strategy is to increase spending in one or more quality cost categories in hopes of achieving greater spending cuts in other quality cost categories. In a team of three or four individuals, prepare an oral presentation to answer the following questions.

a. Which spending categories are most susceptible to control by managers? Why?

b. Why is it more logical for the company to increase spending in the preven¬ tion cost and appraisal cost categories than in the failure cost categories?

c. Which cost category is the most likely target for spending reductions? Explain.

d. How would the adoption of a TQM philosophy affect the focus in reducing quality costs?LO1

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Prevention costs $3,000,000 Appraisal costs 2,000,000 Internal failure costs 2,000,000 External failure costs 1,000,000 Total quality costs $8,000,000