Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

( b ) NovaTech ( Nova ) manufactures high - end gaming laptops, and they're concerned about the recent negative publicity surrounding a competitor's product

image text in transcribed
(b) NovaTech (Nova) manufactures high-end gaming laptops, and they're concerned about the recent negative publicity surrounding a competitor's product failure. Historically, Nova has encountered occasional issues with overheating in their laptops, which can typically be detected and repaired during an internal inspection. The inspection process costs $6 per laptop, with repair costs amounting to $1.25 per unit. Last year, all 150,000 laptops were inspected internally, revealing that 8% had overheating issues. Additionally, another 4% of laptops had overheating problems that went undetected during internal inspections.
Defective units that were sold and shipped to customers had to be recalled for repairs. The cost of recalling and repairing these laptops amounts to $10 per unit. However, the direct costs of external failures don't fully capture the consequences. For 25% of the externally failed units, negative reviews and word-of-mouth damage led to a loss of future sales, resulting in a $400 reduction in profits for each affected unit.
Required:
(i) Calculate the cost of the appraisal process.
(ii) Determine the cost of internal failures.
(iii) Calculate the direct costs associated with external failures.
(iv) Identify the opportunity cost linked to external failures.
(v) What are the total quality costs?
(vi) Nova is considering an alternative inspection plan to reduce upfront costs. This new technique costs $2 per laptop inspected and detects only 6% of laptops with overheating issues during inspection, with the remaining 6% identified after sale and shipping. What are the total quality costs associated with this alternative approach?
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Statement Analysis and Security Valuation

Authors: Stephen Penman

5th edition

78025311, 978-0078025310

More Books

Students also viewed these Accounting questions

Question

why you want to attend graduate school in general;

Answered: 1 week ago