Pareto chart and cost of quality report for a service company obj. 1, 3 The administrator of Hope Hospital has been asked to perform an activity analysis of the emergency room (ER). The ER activities include cost of quality and other patient care activities. The lab tests and transportation are hospital services external to the ER for determining external failure costs. The result of the activity analysis is summarized as follows:

Activities Activity Cost Patient registration $ 6,400 Verifying patient information 9,600 Assigning patients 12,800 Searching/waiting for doctor 8,000 Doctor exam 4,800 Waiting for transport 17,600 Transporting patients 16,000 Verifying lab orders 14,400 Searching for equipment 8,000 Incorrect labs 12,800 Lab tests 17,600 Counting supplies 19,200 Looking for supplies 8,000 Staff training 4,800 Total $160,000 Instructions 1. Prepare a Pareto chart of the ER activities.

2. Classify the activities into prevention, appraisal, internal failure, external failure, and other patient care activities. Classify the activities into value-added and non-value added activities.

3. Use the activity cost information to determine the percentages of total ER costs that are prevention, appraisal, internal failure, external failure, and other patient care activities.

4. Determine the percentages of the total ER costs that are value- and non-value-added.

5. Interpret the information.