Inspection costs

$5.00

per car seat, and repairs cost

$1.50

per car seat. All

175,000

car seats were inspected last year, and

10%

were found to have problems with the stitching. Another

1%

of the

175,000

car seats had problems with thestitching, but the internal inspection did not discover them. Defective units that were sold and shipped to customers are shipped back to

Safe Travel

and repaired. Shipping costs are

$10.00

per car seat, and repair costs are

$1.50

per car seat. Negative publicity will result in a loss of future contribution margin of

$350

for each external failure.

is concerned with the high up-front cost of inspecting all

175,000

units. It is considering an alternative internal inspection plan that will cost only

$1.00

per car seat inspected. During the internal inspection, the alternative technique will detect only

6.0%

of the

175,000

car seats that have stitching problems. The other

5.0%

will be detected after the car seats are sold and shipped. What are the total costs of quality for the alternative technique?

Appraisal cost	$175,000
Internal failure cost
Out of pocket external failure cost	100,625
Opportunity cost of external failure
Total cost of quality