Save Homework: Chp M4: Homework : PM4-37A (similar to) Score: 0 of 30 pts 4 of 4 (1 complete) HW Score: 1.58%, 1.58 of 100 pts Question Help O Lilly, Inc. is using a costs-of-quality approach to evaluate design engineering efforts for a new skateboard. Lilly's senior managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activities over the two-year life of the skateboards follow. Also shown are the predetermined overhead allocation rates for each activity. (Click the loon to view the information.) Read the requirements. i Data Table Predicted Quality Cost Savings Requirement 1. Calculate the predicted quality cost savings from the design engineering work. Predicted Predetermined Reduction in Overhead Allocation Activity Units Rate per Unit Inspection of incoming raw materials 420 S 45 Inspection of finished goods 420 17 Number of defective units discovered in-house 1,100 50 Number of defective units discovered by customers 300 67 Activity Inspection of Incoming raw materials Inspection of finished goods Predicted Predetermined Reduction in Overhead Allocation Activity Units Rate per Unit 420 $ 45 420 17 1.100 50 Lost sales due to dissatisfied customers 100 104 Number of defective units discovered in-house Number of defective units discovered by customers Lost sales due to dissatisfied customers 300 67 Total predicted quality cost savings 100 104 Requirements Print Done 1. Calculate the predicted quality cost savings from the design engineering work. 2. Lilly spent $101.000 on design engineering for the new skateboard. What is the net benefit of this "preventive" quality activity? 3. What major difficulty would Lilly's managers have in implementing this costs-of-quality approach? What alternative approach could they use to measure quality improvement? 2 Clear All Check