Note: Please refer attached screen print for numbers

Photon makes photocopying machines which earned an operating income of $24 Million on revenues of $ 300 million last year.Photon determines the cost of quality by adapting the activity-based costing approach.

Photon's Market Research Department has estimated lost sales of 2,000 photocopying machines during the year because of external failures.The total estimated contribution margin lost on those machines is $12 Million.

Compute the Percentage of Cost of Capital on Total Revenue after including the opportunity costs. What are your recommendations for drastic reduction in the Cost of Quality from next year.

DESCRIPTION RATE QUANTITY TOTAL COST in USD Photon makes photocopying Prevention Costs machines which earned an operating income of $24 Million - Design Engineering $80/hr 40,000 hrs 3,200,000 on revenues of $ 300 million last - Process Engineering $60/hr 145,000 hrs 2,700,000 year. Photon determines the Total Prevention Costs 5,900,000 cost of quality by adapting the Appraisal Costs activity-based costing approach. - Inspection $40/hr 240,000 hrs 9,600,000 Photon's Market Research Total Appraisal Costs 9,600,000 Department has estimated lost Internal Failure Costs sales of 2,000 photocopying - Rework $100/hr 100,000 hrs 10,000,000 machines during the year Total Internal Failure because of external failures. The Costs 10,000,000 total estimated contribution External Failure Costs margin lost on those machines is - Customer Support $50/hr 12,000 hrs 600,000 $12 Million. Compute the Percentage of Cost - Transportation $240/load 3,000 loads 720,000 of Capital on Total Revenue after - Warranty Repairs $110/hr 120,000 hrs 13,200,000 including the opportunity costs. Total External Failure What are your recommendations Costs 14,520,000 for drastic reduction in the Cost Total Cost of Quality 40,020,000 of Quality from next year