Chapter 01 Pre-Built Problems Help Save & Check my Mercury, Inc., produces cell phones at its plant in Texas. In recent years, the company's market share has been eroded by stiff competition from overseas. Price and product quality are the two key areas in which companies compete in this market points foto A year ago, the company's cell phones had been ranked low in product quality in a consumer survey. Shocked by this result, Jorge Gomez, Mercury's president, initiated an intense effort to improve product quality. Gomez set up a task force to implement a formal quality improvement program. Included on this task force were representatives from the Engineering, Marketing, Customer Service, Production, and Accounting departments. The broad representation was needed because Gomez believed that this was a companywide program and that all employees should share the responsibility for its success. Skipped After the first meeting of the task force, Holly Elsce, 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 I'm nervous about having my annual bonus based on a decrease in quality costs, there are too many variables that we have no control over." Mercury's quality improvement program has now been in operation for one year. The company's most recent quality cost report is shown below. Mercury. Inc. Quality Cost Report in thousands) Last This $ 350 $ 150 Prevention costs: Machine maintenance Quality circles Total prevention cost Appraisal costs! Incoming inspection Final testing Total appraisal cost Internal failure conti 1112 126 Scrap Total Internal failure cost External failure coats Warranty repairs customer returns Total external failure cost Total quality cost Total production cost 110 583 $1,171 Chapter 01 Pre-Built Problems Check my work As they were reviewing the report, Elso asked Tran what he now thought of the quality improvement program. Tran replied. Tm relieved that the new quality improvement program hasn't hurt our bonuses, but the program has increased the worldoad 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 company's 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 le 0.1234 should be entered as 12.3).) Mercury, Ine. Quality Cost Report in thousands Percentage of Porcentage of Total Production Total Quality Cost This Year Percentage of Total Production r Cost ou Percentage of Total Quality Con Prevention costs: Machine maintenance Quality 70 235 00 Totalprevention costs Appraisal costs incoming inspection es el Total appraisal costs allure costs: Row Eemale co Warranty repair