Assume you manage an auto repair shop that earns $1,000,000 per year in revenues, generating $100,000 per year of profits on overall operating costs of $900,000, including the cost of poor quality (COPQ). Assume your current COPQ is 20% ($180,000) of overall operating costs.

You and your mechanics have identified projects costing $40,000 (equipment, tools, training) that would likely cut in half the COPQ. What would be your new overall operating costs? What would be your new profit? Explain your reasoning and show your math for both answers.

Should you spend the money ($40,000) on these projects? Explain.

Assume the cost of the project remained at $25,000 but the costs were only reduced by 20%, not by half. Would the project still be worthwhile? Explain.