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You have been asked by the CEO of Yukon Janitorial Supplies Ltd. (YJS) to review the costs of quality for the month of April. All


You have been asked by the CEO of Yukon Janitorial Supplies Ltd. (YJS) to review the costs of quality for the month of April. All amounts are in thousands (000's).

Cost Item

Amount

Product testing

$350

Clean up of toxic spills within the plant

$14,200

Employee quality training

$200

Payments on lawsuits from product failures

$25,000

Quality Engineering

$675

Supplies used in testing

$500

Statistical Process Control

$1,750



Revenue

$345,000

Some information from a competitor, Whitehorse Cleaning Inc. (WC), has been leaked. You learn that WC’s costs of quality (as a percentage of revenue) are 0.5% on external failure, 0.8% on internal failure, 5% on appraisal and 8% on prevention.


Required:

  1. Prepare a cost of the quality report for April for YJS. The report should list all cost items categorized by type of quality cost, including percentages in relation to revenues for each category. (4 marks)






b.Explain to the CEO of YJS, which organization (YJS or WC) has the better approach to quality management. Provide a recommendation for quality cost improvement at YJS. (3 marks)

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