Industrial Technologies, Inc. (ITI), produces two compression machines that are popular with manufacturers of plastics: no. 165 and no. 172. Machine no. 165 has an average selling price of $29,000, whereas no. 172 typically sells for approximately $25,500. The company is very concerned about quality and has provided the following information:

No. 165

No. 172

Number of machines produced and sold

60

100

Warranty costs:

Average repair cost per unit

$

850

$

300

Percentage of units needing repair

65

%

10

%

Reliability engineering at $50 per hour

1,550

hours

1,900

hours

Rework at ITI's manufacturing plant:

Average rework cost per unit

$

1,850

$

1,500

Percentage of units needing rework

40

%

20

%

Manufacturing inspection at $60 per hour

250

hours

400

hours

Transportation costs to customer sites to fix problems

$

28,500

$

13,000

Quality training for employees

$

34,000

$

48,000

Required:

1.	Classify the preceding costs as prevention, appraisal, internal failure, or external failure.

Warranty costs	External failure
Reliability engineering	Prevention
Rework at ITI's manufacturing plant	Internal failure
Manufacturing inspection	Appraisal
Transportation costs to customer sites	External failure
Quality training for employees	Prevention

2.

Using the classifications in part (1), compute ITI's quality costs for machine no. 165 in dollars and as a percentage of sales revenues. Also calculate prevention, appraisal, internal failure, and external failure costs as a percentage of total quality costs. (Round "Percentage of total quality costs" to 2 decimal places. Total may not be equal to 100% due to rounding.)

3.

Using the classifications in part (1), compute ITI's quality costs for machine no. 172 in dollars and as a percentage of sales revenues. Also calculate prevention, appraisal, internal failure, and external failure costs as a percentage of total quality costs. (Round "Percentage of total quality costs" to 2 decimal places. Total may not be equal to 100% due to rounding.)