Classifying Costs of Quality. Jackie Hill, controller of Detroit Medical, has reviewed the costs of quality records for the past year. Detroit Medical provides calibration and maintenance services for sophisticated medical equipment in the midwest. Training, testing, and service calls are major costs that seem to grow each year. Jackie is trying to measure possible ways of reducing the total costs of quality as part of a review of all processes and activities within the firm. She assembled the following costs.

She is aware of two contracts that were cancelled this past year because of client complaints about poor service response. These contracts totalled \(\$ 60,000\).
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1. Classify these costs according to prevention, appraisal, internal failure, and external failure.
2. Comment on the difficulty that Ms. Hill likely has in analyzing these and other costs that might be costs of quality.

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Parts warranty, including replacement labor... Emergency trips to service client machines Rental of substitute equipment to cover client downtime. Training of repair technicians (time and travel).... Inspection of finished repairs....... Testing and certifications of calibration equipment. Development of client testing processes and diagnostics $ 92,000 86,000 43,000 196,000 45,000 15,000 31,500