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.