Read the scenario below and calculate the total cost of Quality for last month.

Organize/categorize the individual "line item" costs by each of the four costs of quality. Then calculate the cost for each of the four primary costs of quality and the total cost of quality.

Exercise Objective: To properly identify the four cost of quality and calculate the total cost of quality.

Course Learning Objectives: Use a variety of current industry quality tools for measuring and monitoring quality; Define foundational concepts related to quality and quality management.

BAYLOR Inc., a manufacturer of widgets, has experienced the following in the previous month.

Four (4) products were returned. Of these three (3) units were repaired under warranty at a cost of $400 for materials and labor (total for all). The other unit was replaced. The production cost is $350 per unit. All replacement or warranty repaired unit are returned shipped to customer by expedited shipping at a cost of $100 per unit.

They reported 62 units that failed inspection. Of those 48 units were reworked. Replacement parts for those totaled $150. The labor cost (direct labor + benefits and taxes) for the rework was $450. The cost for reinspection of the reworked units was $150. Additionally, when the bad units were found production was stopped for 30 minutes to troubleshoot this issue so that it would not continue to occur for subsequent production. The value of the lost production time (labor + benefits/taxes and depreciation recovery by capital equipment) was valued at $800. The remaining 14 were not repairable. The material invested in those units totaled $2600. They were sent to recycling/reclaim where $250 was paid to BAYLOR by the recyclers. The lost value of the invested labor (direct labor + benefits and taxes) was $600. To replace the 14 units that were scrapped, $750 of overtime labor was required.

BAYLOR, Inc. has a person in their Customer Service department who handles customer complaints and issues RMAs (return material authorization). The monthly charge is $1500 to cover the portion of this person's salary (plus benefits/taxes).

The monthly portion of the salary (plus benefits/taxes) of the inspector who performs receiving inspection (materials received from suppliers) is $2100.

The Procurement Department conducted an audit/assessment of a possible new supplier who could provide improved raw materials. The employee costs (salaries + benefits/taxes) plus travel expenses were

$2200. Additionally, the annual audit of one of BAYLOR's existing supplier occurred costing $1600 in employee and travel expenses.

There are two (2) full-time inspectors who check finished products and perform in-process audits. The monthly portion of their salaries (plus benefits/taxes) is $4900.

The monthly calibration of equipment cost $250.

During last month, a Kiazen improvement "event" (project) occurred using a cross functional team. The employee cost (salaries + benefits/taxes) and project expenses (equipment and materials) totaled $8600.

The monthly portion of the quality system records-keeper salary (plus benefits/taxes) is $2700.

One customer had installed a widget that failed. BAYLOR, Inc. sent a technician to replace the widget at the customer's site. The employee costs (salaries + benefits/taxes) plus travel expenses were $3000 plus a new widget (at cost).

One department conducted skills training class for three employees. The total cost of the training was $600 plus employee labor costs of $200 (per person).

(see reverse side for more)

Below would be a general idea of a good format (as from accounting).

External Failure Cost

(state item, for example, Warranty repair) $5,000

(Item 2) xxx

(Item 3) xxx

Subtotal for Ext. Failure Cost $x,xxx

Then overall summary, for example:

Total Cost of Quality Prevention Cost $x,xxx

Appraisal Cost x,xxx

External Failure Cost x,xxx

Internal Failure Cost x,xxx

$xx,xxx