Costen, Inc., produces cellphone equipment. Jessica Tomly, Costens president, decided to devote more resources to the improvement of product quality after learning that her company had been ranked fourth in product quality in a 2009 survey of cellphone users. Costens quality-improvement program has now been in operation for two years, and the cost report shown here has recently been issued.

Semi-Annual Cost of Quality Report Costen, Inc.

30 / 06 / 2010 31 / 12/ 2010 30 / 06 / 2011 31 / 12 / 2011

Prevention costs Maintenance Supplier training Design reviews Total

440 000 20 000 50 000 510 000

440 000 100 000 214 000 754 000

390 000 50 000 210 000 650 000

330 000 40 000 200 000 570 000

Appraisal costs Incoming inspections Final testing Total

108 000 332 000 440 000

123 000 332 000 455 000

90 000 293 000 383 000

63 000 203 000 266 000

Internal failure costs Rework Scrap Total

231 000 124 000 355 000

202 000 116 000 318 000

165 000 71 000 236 000

112 000 67 000 179 000

External failure costs Warranty repairs Customer returns Total

165 000 570 000 735 000

85 000 547 000 632 000

72 000 264 000 336 000

68 000 188 000 256 000

Total quality costs 2 040 000 2 159 000 1 605 000 1 271 000

Total revenues 8 240 000 9 080 000 9 300 000 9 020 000

Required:

4.1 For each period, calculate the ratio of each cost of quality category to revenues and to total quality costs.

4.2 Based on the results in 4.1, would you conclude that Costens quality program has been successful? Prepare a short report to present your case.