1.0 Problem/Case Description Last year, sales from the Transmotor division of PDQ Company were approximately $25 million, consisting of about 90% industrial customers and 10% government contracts. Profits after taxes were $1.2 million. Sales increased steadily from $1.5 million in January to $2.6 million in December. This increase was due to the introduction and wide acceptance of a new product design. The new product was more reliable and cost less to produce. A recently hired quality engineer started working on analysis of the quality program. He was able to improve systems and procedures, but since the middle of last year, high rejection rates on the new product (both at final assembly and on parts) forced him to spend most of his time attempting to solve some of the problems that were causing the high rejection rates. The divisions quality manager, Carl Harris, has heard about the QC management technique and wants to see whether it can benefit his division. Carl has attended several ASQ conferences and seminars and was able to talk with quality control managers of similar companies. It appeared to him that QCs between 4% and 6% of net sales billed are common in companies making similar products. He is not sure; however, which cost elements are included in his competitors is QCs. A rough calculation of his divisions costs for the prior years month of October showed: Carls first attempt at establishing a quality-engineering program began over a year and a half ago with the hiring of an ASQ-certified quality engineer. Improvement of inspection methods and solutions to a few chronic quality problems have since enabled Carl to reassign several inspectors and cover the increased production load without increasing the number of inspectors in the last three-quarters of the previous year. To date, a considerable amount of 100% inspection is still being done, however, and Carl believes that more of the inspection process can be eliminated by upgrading the efficiency of the manufacturing process.

The cause of high rejection rate on the new product is not known. Manufacturing blames a faulty design and the purchase of bad material. Design engineering claims that the existing tolerances are not being met and that parts are being mishandled before they get to the assembly area. Carl decides to find out which departments are the high cost contributors by setting up a QC program. 2.0 Quality Cost Data Please find the attached excel spreadsheet for the cost data. 3.0 Trend Chart Analysis i. Plot graphs for actual quality costs of each cost category (prevention, appraisal, internal and external failure, total quality cost) from January to December. ii. Describe the trends for each graph plotted in the previous question (i) iii. Plot graphs for quality costs of each cost category (prevention, appraisal, internal and external failure, total quality cost) as a percent of net sales billed from January to December. iv. Describe the trends for each graph plotted in the previous question (iii) v. Plot graphs for quality costs of each cost category (prevention, appraisal, internal and external failure, total quality cost) as a percent of costs of unit shipped from January to December. vi. Describe the trends for each graph plotted in the previous question (v) vii. Plot graphs for quality costs of each cost category (prevention, appraisal, internal and external failure, total quality cost) as a percent of factory hours from January to December. viii. Describe the trends for each graph plotted in the previous question (vii) ix. Plot internal failure costs for each of the contributing factors from January to December. x. Explain the three largest dollar contributors to internal failure costs. xi. Plot Pareto distributions for each cost element (yearly total only) that contributes to internal failure costs. 4.0 Conclusion Based on the data and analysis from question 3 (i) to (xi), as a quality manager, identify and list the tasks or action items that are to be carried out to reduce quality costs. [List the number of tasks as appropriate from your analysis.]

Prevention Appraisal Internal Failure External Failure Supplier Quality Cost $ 1,000 100,000 36,000 27,000 $164,000 Prevention Appraisal Internal Failure External Failure Supplier Quality Cost $ 1,000 100,000 36,000 27,000 $164,000