Required: 1. Expand the company's quality cost report by showing the costs in both years as percentages of both total production cost and total quality cost. Carry all computations to one decimal place. By analyzing the report, determine if Mercury, Inc.'s quality improvement program has been successful. List specific evidence to support your answer. 2. Do you expect the improvement program as it progresses to continue to increase the workload in the Production Department? 3. Jorge Gomez believed that the quality improvement program was essential and that Mercury, Inc., could no longer afford to ignore the importance of product quality. Discuss how Mercury, Inc., could measure the cost of not implementing the quality improvement program. Required: 1. Expand the company's quality cost report by showing the costs in both years as percentages of both total production cost and total quality cost. (Round your percentage answers to 1 decimal place (.e 0.1234 should be entered as 12.3).) lercury, Inc. Quality Cost Report (in thousands) Last Year Percentage of Percentage of Total Production Total Quality Cost Cost Amount This Year Percentage of Total Production Cost Amount Percentage of Total Quality Cost $ 70 10.4 20.30 1.7 0.0 0.0 1.7 0.0 0.0 10.4 18 3.4 25.4 3.0 20 80 100 0.5 1.9 2.4 11.9 16.30 14.9 221 Prevention costs: Machine maintenance Training suppliers Quality circles Total prevention costs Appraisal costs: Incoming inspection Final testing Total appraisal costs Internal failure costs: Rework Scrap Total internal failure costs External failure costs: Warranty repairs Customer returns Total external failure costs Total quality cost Total production cost 2.7 22.00 11.9 33.9 1.07 2.2 5.1 13.4 47.8 13.6 320 410 18.7 61.2 110 590 12.3 100.1 100.0 16.0 670 4,800 4,200 about having my annual bonus based on a decrease in quality costs: there are too many variables that we have no control over Mercury's quality improvement program has now been in operation for one year. The company's most recent quality cost report is shown below. Mercury, Inc. Quality Cost Report in thousands) Last Year This Year Prevention costs: Machine maintenance $ 70 $ 120 Training suppliers Quality circles Total prevention cost Appraisal costs: Incoming inspection Final testing Total appraisal cost Internal failure costs: Rework Scrap Total internal failure cost External failure costs: Warranty repairs Customer returns Total external failure cost 110 Total quality cost 670 $ 590 Total production cost 4,200 410 $4.800 As they were reviewine the report, Elsoe asked Tran what he now thought of the quality improvement program. Tran replied. I'm
