Question
Advanced Technologies (AT) produces two compression machines that are popular with manufacturers of plastics: no. 165 and no. 172. Machine no. 165 has an average
Advanced Technologies (AT) produces two compression machines that are popular with manufacturers of plastics: no. 165 and no. 172. Machine no. 165 has an average selling price of $31,400, whereas no. 172 typically sells for approximately $28,200. The company is very concerned about the quality and has provided the following information:
No. 165 | No. 172 | ||||||
Number of machines produced and sold | 230 | 235 | |||||
Warranty costs: | |||||||
Average repair cost per unit | $ | 970 | $ | 420 | |||
Percentage of units needing repair | 60 | % | 10 | % | |||
Reliability engineering at $185 per hour | 1,670 | hours | 2,035 | hours | |||
Rework at AT's manufacturing plant: | |||||||
Average rework cost per unit | $ | 1,970 | $ | 1,670 | |||
Percentage of units needing rework | 30 | % | 20 | % | |||
Manufacturing inspection at $40 per hour | 370 | hours | 535 | hours | |||
Transportation costs to customer sites to fix problems | $ | 30,200 | $ | 16,400 | |||
Quality training for employees | $ | 35,700 | $ | 51,400 | |||
Required: 1. Classify the preceding costs as prevention, appraisal, internal failure, or external failure. 2-a. Using the classifications in requirement 1, compute AT's quality costs for machine no. 165 in dollars and as a percentage of sales revenues. 2-b. Using the classifications in requirement 1, compute AT's prevention, appraisal, internal failure, and external failure costs as a percentage of total quality costs. 3-a. Using the classifications in requirement 1, compute AT's quality costs for machine no. 172 in dollars and as a percentage of sales revenues. 3-b. Using the classifications in requirement 1, compute AT's prevention, appraisal, internal failure, and external failure costs as a percentage of total quality costs. 4. Is the company "investing its quality expenditures differently for the two machines?
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