Costs of Quality Trends. Schadler Enterprises, a consulting firm, recently studied its costs over the past three years. The partners of the firm have been promoting total quality management programs to its clients for years. They finally decided to apply the same concepts to their own business. After much discussion, they adopted certain definitions of quality costs and began to monitor them. They did acknowledge that internal failure costs also included costs of nonvalue-added activities that were not technically failure costs. Now, three years later, they show the following data as highly summarized results of their efforts.

Required:
Comment on the results of the three-year effort.

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Prevention costs Appraisal costs Internal failure costs External failure costs 1994 1st Half 2nd Half 1st Half 1995 2nd Half 1st Half 1996 2nd Half $ 5,000 $ 20,000 $ 50,000 $ 60,000 $ 50,000 $ 55,000 40,000 60,000 120,000 130,000 65,000 120,000 70,000 123,000 72,000 70,000 110,000 105,000 43,000 30,000 25,000 26,000 18,000 Client billings have gone up modestly over the three years, perhaps 20 percent in total. 15,000