Go Deaf manufactures high-quality speakers. Suppose Go Deaf is considering spending the following amounts on a new quality program:

Additional 20 minutes of testing for each speaker. . . . . . . . . . . . . . . . . . . . . .	$606,000
Negotiating with and training suppliers to obtain higher-quality materials and on-time delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$300,400
Redesigning the speakers to make them easier to manufacture. . . . . . . . . . .	$1,404,000

Go Deaf expects this quality program to save costs as follows:

Reduced warranty repair costs. . . . . . . . . . . . . . . . . . . . . . . .$205,000

Avoid inspection of raw materials. . . . . . . . . . . . . . . . . . . . . .$404,000

Rework avoided because of fewer defective units. . . . . . . .$658,000

It also expects this program to avoid lost profits from the following:

Lost sales due to disappointed customers. . . . . . . .	$855,000
Lost production time due to rework. . . . . . . . . . . . . .	$303,000

1.	Classify each of these costs into one of the four categories of quality costs (prevention, appraisal, internal failure, external failure).
2.	Should Go Deaf implement the quality program? Give your reasons.

1. First classify each of these costs into one of the four categories of quality costs, then prepare a cost-benefit analysis of the proposed quality program based on the four categories identified. (Use a minus sign or parentheses for savings amounts.)

Cost (Benefit) Analysis
Prevention costs:
Appraisal costs:
Internal failure costs:
External failure costs:
Net cost (benefit) from implementing quality program