Thermaglass, Inc., makes a large number of products for use in the kitchen. The company advertises that its products can go from the freezer to the oven or the microwave and never crack. Over the past two years, however, there have been increasing problems with products failing to stand up to these rapid changes in temperature. With the company’s reputation and future on the line, Randy Paul, the company’s president, has decided to put in place a new cost of quality reporting system so management can see exactly where the problems are coming from. The company provides you with the following data.     

REQUIRED:

a. Develop a cost of quality report for the company. State the amounts in both dollars and percent of the total.

b. The company’s revenue for the year was $25,000,000. What percent of its total revenue are the quality costs?

c. Where should the company place its attention in the coming year to most improve its quality performance? Why?

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Quality Activity Cost Recalls $250,000 Design changes $400,000 In-process inspection Pilot testing $250,000 $300,000 Recalibration $125,000 Scrap costs $175,000 Returns $350,000 Kitchen burn-in tests $75,000 Salvage Final inspection $125,000 $45,000 TOM training $15,000