Question One : Quality Cost Calculation ABC children's toy manufacturing company implemented the Lean Six Sigma program in 2004. Following are quality-related accounting data that have been accumulated for the 5-year period 1 year prior to the programs start. 2004 2005 2006 2007 2008 Year Quality Costs (000s) Prevention Appraisal Internal Failure External Failure Accounting Measures (000s) Sales Manufacturing costs $ 3.2 26.3 39.1 118.6 10.7 29.2 51.3 110.5 28.3 30.6 48.4 105.2 42.6 24.1 35.9 91.3 50.0 19.6 32.1 65.2 $ 2,700.6 420.9 2,690.1 423.4 2,705.3 424.7 2,810.2 436.1 2,880.7 435.5 a. Compute the company's total failure costs as a percentage of total quality costs for each of the 5 years. Does there appear to be a trend to this result? If so, speculate on what 5 might have caused the trend. b. Compute prevention costs and appraisal costs, each as a percentage of total costs, during each of the 5 years speculate on what the company's quality strategy appears to be. c. Compute quality -sales indices and quality-cost indices for each of the 5 years. Is it possible to assess the effectiveness of the company's quality-management program from these index values? d. List several examples of each quality-related cost-that is, prevention, appraisal, and internal and external failure that might result from the production of children toys. Question One : Quality Cost Calculation ABC children's toy manufacturing company implemented the Lean Six Sigma program in 2004. Following are quality-related accounting data that have been accumulated for the 5-year period 1 year prior to the programs start. 2004 2005 2006 2007 2008 Year Quality Costs (000s) Prevention Appraisal Internal Failure External Failure Accounting Measures (000s) Sales Manufacturing costs $ 3.2 26.3 39.1 118.6 10.7 29.2 51.3 110.5 28.3 30.6 48.4 105.2 42.6 24.1 35.9 91.3 50.0 19.6 32.1 65.2 $ 2,700.6 420.9 2,690.1 423.4 2,705.3 424.7 2,810.2 436.1 2,880.7 435.5 a. Compute the company's total failure costs as a percentage of total quality costs for each of the 5 years. Does there appear to be a trend to this result? If so, speculate on what 5 might have caused the trend. b. Compute prevention costs and appraisal costs, each as a percentage of total costs, during each of the 5 years speculate on what the company's quality strategy appears to be. c. Compute quality -sales indices and quality-cost indices for each of the 5 years. Is it possible to assess the effectiveness of the company's quality-management program from these index values? d. List several examples of each quality-related cost-that is, prevention, appraisal, and internal and external failure that might result from the production of children toys
