Company annualized quality costs are shown below. Using the PAF Paradigm, allocate each quality cost to the correct category and calculate the following.

Total Quality Cost

Ratio of appraisal to failure cost

Ratio of prevention to failure cost

Ratio of prevention and appraisal to failure cost

Proportion of prevention, appraisal, and failure

What do the numbers tell you about the state of quality at the company? What should the company do?

Annualized Quality Cost Item Cost Troubleshooting quality issues $5,000 Customer mandated 100% inspection 35,000 Rework of defective product 4,000 Production disruption 32,000 Supplier quality audits 14,000 Strategic quality planning process 15,000 Complaint handling 8,000 Warranty analysis 8,000 Inspection and test equipment 15,000 Inspection labor 45,000 Scrap recovery (funds from sale of scrap) 40,000 Value add of scrap 40,000 Unscheduled customer visits 12,000 Random material certification 9,000 Layered audits - internal 4,000 Internal costs for internal audit program 27,000 Expedited cost due to shortages 14,000 ISO prep cost 5,000 Customer quality awards assessement 8,000 Warranty costs 115,000 PM Implementation 115,000 Product Re-design (internal) 35,000 Excess inventory buffer to compensate reject rate 65,000 Emergency Maintenance (unplanned) 112,000 Gauge certification 56,000 Cost of corrective actions 45,000 Acceptance testing 35,000 Material and labor shortages 37,000