Question
Lori, Inc.., is using a cost-of quality approach to evaluat design engineering efforts for a new skateboard. Lori's senior managers expect the engineering work to
Lori, Inc.., is using a cost-of quality approach to evaluat design engineering efforts for a new skateboard. Lori's senior managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activities over the 2-year life of the skateboards follow. Also shown are the cost allocation rates for each activity. Requirement 1. Calculate the predicted quality cost savings from the design engineering work. The predictive quality cost savings from the design engineering work is how much? Requirement 2. Lori spent 105,000 on design engineering for the new state board. What is the net benefit of this preventive quality activity is? Requirement 3. What major difficulty would lori's managers have implementing the costs-of quality approach? (A)measuring the cost of engineering is difficult.(B)measuring the cost of inspection activities is difficult.(C)measuring the cost of quality related activities is difficult. What alternative approach could they use to measure quality improvement?(A)focus only on financial measures of quality.(B)monitor competitors measures of quality and continuously try to improve them.(C)monitor nonfinancial measures of quality and continuously try to improve them.
Information:
Activity- Predicted reduction in activity units Activity cost allocation rate per unit
Inspection of incoming materials 410 44
Inspection of finished goods 410 20
Number of defective units
discovered in-house 1,600 49
Number of defective units
discovered by customers 375 72
Lost sales to dissatisfied 200 99
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