After the first meeting of the task force, Holly Elsoe, manager of the Marketing Department, asked John Tran, production manager, what he thought of the proposed program. Tran replied, I have reservations. Quality is too abstract to be attaching costs to it and then to be holding you and me responsible for cost improvements. I like to work with goals that I can see and count! Im nervous about having my annual bonus based on a decrease in quality costs; there are too many variables that we have no control over.

Mercurys quality improvement program has now been in operation for one year. The companys most recent quality cost report is shown below.

Mercury, Incorporated
Quality Cost Report
(in thousands)
	Last Year	This Year
Prevention costs:
Machine maintenance	$ 360	$ 120
Training suppliers	8	20
Quality circles	22	80
Total prevention cost	390	220
Appraisal costs:
Incoming inspection	60	30
Final testing	180	86
Total appraisal cost	240	116
Internal failure costs:
Rework	150	68
Scrap	72	50
Total internal failure cost	222	118
External failure costs:
Warranty repairs	77	27
Customer returns	250	86
Total external failure cost	327	113
Total quality cost	$ 1,179	$ 567
Total production cost	$ 4,260	$ 4,660

As they were reviewing the report, Elsoe asked Tran what he now thought of the quality improvement program. Tran replied. Im relieved that the new quality improvement program hasnt hurt our bonuses, but the program has increased the workload in the Production Department. It is true that customer returns are way down, but the cell phones that were returned by customers to retail outlets were rarely sent back to us for rework.

Required:

1. Expand the companys quality cost report by showing the costs in both years as percentages of both total production cost and total quality cost. (Round your percentage answers to 1 decimal place (i.e 0.1234 should be entered as 12.3).)