ClasonClason

Corp. manufactures radiation-shielding glass panels.

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Requirements

1. Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.

2. Should

ClasonClason

implement the new quality program? Give your reason.

Requirement 1. Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.

Type of Quality Cost	Cost
	Strength-testing one item from each batch of panels

Suppose

ClasonClason

is considering spending the following amounts on a new TQM program:

Strength-testing one item from each batch of panels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$71,000
Training employees in TQM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$31,000
Training suppliers in TQM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$35,000
Identifying preferred suppliers that commit to on-time delivery of perfect quality materials. . . . . . .	$50,000

ClasonClason

expects the new program to save costs through the following:

Avoid lost profits from lost sales due to disappointed customers. . . . .	$90,000
Avoid rework and spoilage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$61,000
Avoid inspection of raw materials. . . . . . . . . . . . . . . . . . . . . . . .	$55,000
Avoid warranty costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$17,000