(ROI, RI, division manager's compensation, nonfinancial measures - CGA adapted)

General Appliance builds coffee makers and battery-powered small tools. For a long time, GA held a reputation for strong, durable, and reliable appliances. This reputation began to decline however when increased competition forced GA to cut costs, and this was handled poorly. For a moderate period following the cost cutting, as long as they were able to take advantage of their reputation, GA's sales remained relatively steady. This effect then all but disappeared. The loss of reputation, coupled with increased overseas competition, caused GA's sales to plummet sharply.

On January 1, 2018, GA began a massive effort directed toward rewarding for quality. In the two years that followed, sales failed to go up, but remained steady at around $10 million per year. A significant amount of money was spent on testing equipment, increasing inspection, setting up a statistical process control system, reworking or throwing out defective items, and on paying incentives. The results of the effort are presented in the following exhibit:

Quality costs as a % of sales for the years ended: 2017 2018 2019 External Failure Costs 8.20 2.40 1.15 Internal Failure Costs 2.80 4.00 3.40 Appraisal Costs 2.00 3.20 3.39 Prevention Costs 1.20 2.60 2.79 Total Quality Costs 14.20 12.20 10.732019 Net prot Investment External failures Intemal failures Appraisal costs Prevention Costs Electronic circuits $500,000 $2,500,000 0% of sales 5% of sales 0% of sales 1% of sales Coffee makers $700,000 $7,000,000 1.2% of sales 2% of sales 5.2% of sales 7% of sales Batterypowered small tools $000,000 $0,000,000 2.4% of sales 3.2% of sales 3.1% of sales 4.2% of sales