19-16 Costs of quality. (CMA, adapted) Osborn, inc., produces cell phone equipment. Amanda Westerly, Osborn's president, decided to devote more resources to the improvement of product quality after learning that her company had been ranked fourth in product quality in a 2011 survey of cell phone users. Osborn's quality-improvement program has now been in operation for 2 years, and the cost report shown here has recently been issued.

	Semi-Annual COQ Report, Osborn, inc. (in thousands)
				6/30/2012		12/31/2012		6/30/2013		12/31/2013
	Prevention costs
	Machine Maintenance			$480		$480		$440		$290
	Supplier training			21		90		45		35
	Design reviews			30		218		198		196
		Total prevention costs		531		788		683		521
	Appraisal costs
	Incoming inspections			109		124		89		55
	Final testing			327		327		302		202
		Total appraisal costs		436		451		391		257
	Internal failure costs
	Rework			226		206		166		115
	Scrap			127		124		68		65
		Total internal failure costs		353		330		234		180
	External failure costs
	Warranty repairs			182		89		70		67
	Customer returns			594		510		263		186
		Total external failure costs		776		599		333		253
	Total quality costs			$2,096		$2,168		$1,641		$1,211
	Total revenues			$8,220		$9,180		$9,260		$9,050

For each period, calculate the ratio of each COQ category to revenues and to total quality costs.

Based on the results of requirement 1, would you conclude that Osborn's quality program has been successful? Prepare a short report to present your case.For each period, calculate the ratio of each COQ category to revenues and to total quality costs.

Based on the 2011 survey, Amanda Westerly believed that Osborn had to improve product quality. In making her case to Osborn management, how might westerly have estimated the opportunity cost of not implementing the quality-improvement program?