Slide Corporation manufactures combustion engines for cars. The company’s goal is to manufacture defect free combustion engines. The management of Slide Corporation has decided to implement a quality improvement programme. Given below is the list of quality costs incurred by the company in the current year:

The company has allocated costs related to quality and quality control and spent the money on achieving the highest quality of conformance. The company’s sales are equal to £80,000,000 each year.

Required
1. Slide Corporation wants its engines to adhere to a certain level of quality conformance. Briefly explain the four types of quality cost that are incurred to prevent defects or that are incurred as a result of defects occurring.
2. Categorize the quality costs incurred by Slide Corporation into prevention costs, appraisal costs, internal failure costs and external failure costs.
3. Determine the total amount of prevention costs, appraisal costs, internal control costs, external control costs and total quality costs. Also, determine prevention costs, appraisal costs, internal control costs and external control costs as percentages of the total sales amount.
4. Comment on the distribution of the quality costs of Slide Corporation.

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Quality costs Field trials at client site Downtime caused by quality problems Engine testing Engine recalls Quality training programme Supervision of testing and inspecting activities Warranty repairs and replacement costs Quality engineering Retesting of reworked engines Reliability testing Cost of field servicing and handling complaints Depreciation of test engine Net cost of spoilage Returns and allowances arising from quality problems Disposal of defective engines Reinspection of reworked engines Statistical process control activities Liability arising from defective engines Current year cost £400,000 800,000 650,000 650,000 350,000 700,000 700,000 150,000 500,000 300,000 320,000 1,050,000 350,000 1,150,000 1,100,000 250,000 1,000,000 1,350,000