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Quality Costs: Identification and Analysis Points 25 Advanced Technologies (AT) produces two compression machines that are popular with manufacturers of plastics: no. 165 and no.
| Quality Costs: Identification and Analysis | Points | 25 | ||||||||
| Advanced Technologies (AT) produces two compression machines that are popular with manufacturers of plastics: no. 165 and no. 172. Machine no. 165 has an average selling price of $60,000, whereas no. 172 typically sells for approximately $55,000. The company is very concerned about quality and has provided the following information: | ||||||||||
| Requirements: | ||||||||||
| 1. Classify the preceding costs as prevention, appraisal, internal failure, or external failure. | ||||||||||
| 2. Using the classifications in requirement (1), compute ATs quality costs for machine no. 165 in dollars and as a percentage of sales revenues. Also calculate prevention, appraisal, internal failure, and external failure costs as a percentage of total quality costs. | ||||||||||
| 3. Repeat requirement (2) for machine no. 172. | ||||||||||
| 4. Comment on your findings, noting whether the company is investing its quality expenditures differently for the two machines. | ||||||||||
| 5. Quality costs can be classified as observable or hidden. What are hidden quality costs, and how do these costs differ from observable costs? | ||||||||||
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