Example #5-Cost of Quality-Cost benefit analysis Oak Tree, Inc. is preparing a cost benefit analysis for a quality program. Classify each of these items as either prevention, appraisal, internal or external failure costs. Then calculate the net savings or cost by implementing the program. Should they adopt the program? Costs Strength testing one item from each $65,000 batch of panels Training employees in TQM Training suppliers in TQM Identifying preferred suppliers who $60,000 commit to on-time delivery of perfect quality materials $30,000 $40,000 Savings Avoid lost profits from lost sales $90,000 due to disappointed customers Avoid rework and spoilage Avoid inspection of raw materials$45,000 Avoid warranty costs $55,000 $15,000