Problem 10-32 (similar to) Question Help Snugg Design produces cell phone covers for all makes and models of cell phones. Snugg Design sells 1,010,000 units each year at a price of $16 per unit and a contribution margin of 36%. A survey of Snugg Design customers over the past 12 months indicates that customers were very satisfied with the products, but a disturbing number of customers were disappointed because the products they purchased did not fit their phones. They then had to hassle with returns and replacements. Snugg Design's managers want to modify their production processes to develop products that more closely match Snugg Design's specifications because the quality control in place to prevent ill-fitting products from reaching customers is not working very well. (Click on the icon to view the current costs of quality) Required Current costs of quality i Required pvi esign's managers' plan to $ Prevention costs Appraisal costs Internal failure costs 200.000 108.000 S ind par COQ (cost of quality) and the Rework S 1. Which cost of quality category are managers focusing on? Why? 2. If the improvements result in a 52% decrease in product replacement cost and a 66% decrease in customer retums, what is the total benefit amount for the changes to the COQ (cost of quality) and the company's operating income? What should Snugg Design do? 3. Calculate prevention, appraisal, internal failure, and external failure costs as a percentage of total quality costs and as a percentage of sales before and after the change in the production process. Comment briefly on your results. 422,000 23.000 Scrap $ $ 327,500 $ 789.000 Print Done External failure costs Product replacements Lost sales from customer returns The QC manager and controller have forecast the following additional costs to modify the production process. CAD design improvement Improve machine calibration to specifications 147.500 S S 136.000 Enter your answer in the answer box and then click Check Answer. Print Done 5 Pemaining heck