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 Prevention Costs -Design Engineering $80/hr 40,000 hrs - Process Engineering $60/hr 45,000 hrs Total Prevention Costs 5,900,000 Appraisal Costs Inspection $40/hr 240,000 hrs Total Appraisal Costs Internal Failure Costs - Rework $100/hr 100,000 hrs Total Internal Failure Costs External Failure Costs - Customer Support -Transportation $50/hr 12,000 hrs $240/load 3,000 loads -Warranty Repairs Total External Failure Costs $110/hr 120,000 hrs Total Cost of Quality TOTAL Photon makes photocopying COST in USD machines which earned an operating income of $24 Million 3,200,000 on revenues of $ 300 million last 2,700,000 year. Photon determines the cost of quality by adapting the activity-based costing approach. 9,600,000 Photon's Market Research Department has estimated lost sales of 2,000 photocopying machines during the year 9,600,000 10,000,000 because of external failures. The 10,000,000 total estimated contribution 600,000 13,200,000 margin lost on those machines is $12 Million. Compute the Percentage of Cost 720,000 of Capital on Total Revenue after including the opportunity costs. What are your recommendations 14,520,000 for drastic reduction in the Cost 40,020,000 of Quality from next year.