savi rs Requirements 1. 2. Calculate the predicted quality cost savings from the design engineering work. Sherri spent $100,000 on design engineering for the new skateboard. What is the net benefit of this "preventive" quality activity? 3. What major difficulty would Sherri's managers have in implementing this costs-of-quality approach? What alternative approach could they use to measure quality improvement? Print Done - X Shem, Inc. is using a costs-of-quality approach to evaluate design engineering efforts for a new skateboard. Shem's senior managers expect the engineering work to reduce appraisal, internal failure, and extema failure activities. The predicted reductions in activities over the two-year ife of the skateboards follow. Also shown are the predetermined overhead allocation rates for each activity. (Click the loon to view the information.) Read the moment Requirement 1. Calculate the predicted quality cost savings from the design engineering work. Predetermined Predicted Reduction in Overhead Allocation Activity Units Rate per Unit Inspection of incoming raw materials 300 5 45 Inspection of finished goods 390 23 Number of defective units discovered in-house 1,100 55 Number of defective units discovered by customers 425 74 Lost sales due to dissatisfied customers 150 104 Total predicted quality cost savings CD Predicted Quality Cost Savings CFA 10 Teduce appraisal, internal failure, an in activities over the two-year life of the skateboards follow. Also shown are the predetermined overhead allocation rates for each activity. Data table qua Activity Inspection of incoming raw materials Inspection of finished goods in- by ars Number of defective units discovered in-house Number of defective units discovered by customers Lost sales due to dissatisfied customers Predicted Reduction in Predetermined Overhead Allocation Activity Units Rate per Unit 390 $ 45 390 23 1,100 55 425 74 150 104 Print Done - X