=+16-17 K Costs of quality analysis OBJECTIVE 2 Cosy Capsule produces car seats for children from newborn to two years old. The company is worried because one of its competitors has recently come under public scrutiny owing to product failure. Historically, Cosy Capsule’s only problem with its car seats was stitching in the straps. The problem can usually be detected and repaired during an internal inspection. The cost of the inspection is

$4, and the repair cost is $0.75. All 250000 car seats were inspected internally last year and 9% were found to have problems with the stitching in the straps. Another 3% of the 250000 car seats had problems with the stitching, but the internal inspection did not discover them. Defective units that were sold and shipped to customers needed to be shipped back to Cosy Capsule and repaired.

Shipping costs are $7, and repair costs are $0.75. However, the out-of-pocket costs (shipping and repair) are not the only costs of defects that remained undiscovered in the internal inspection. For 20% of the external failures, negative word of mouth will result in a loss of $300 for each of the 20% of units with external failures.

Required 1 Calculate the appraisal cost.