Secure Travel produces car seats for children from newborn to $2$ years old. The company is worried because one of its competitors has recently come under public scrutiny because of product

failure. Historically, Secure Travel's only problem with its car seats was stitching in the straps. The problem can usually be detected and repaired during an intemal inspection. The cost of the

inspection is $$4\mathrm{.}00$ per car seat, and the repair cost is $$1\mathrm{.}00$ per car seat. All $215,000$ car seats were inspected last year, and $4\%$ were found to have problems with the stitching in the straps during

the internal inspection. Another $1\%$ of the $215,000$ car seats had problems with the stitching, but the internal inspection did not discoyer them. Defective units that were sold and shipped to customers

needed to be shipped back to Secure Travel and repaired. Shipping. costs are $$9\mathrm{.}00$ per car seat, and repair costs are $$1\mathrm{.}00$ per car seat. However, the out$-$of$-$pocket costs $($shipping and repair$)$ are

not the only costs of defects not discovered in the internal inspection. Negative publicity will result in a loss of future contribution margin of $995$ for each extemal failure.

Read the requirements.

Requirement $1.$ Calculate appraisal cost.

What is the appraisal cost?

Required

Calculate appraisal cost.

Calculate internal failure cost.

Calculate out$-$of$-$pocket external failure cost.

Determine the opportunity cost associated with the external failures.

What are the total costs of quality?

Secure Travel is concerned with the high up$-$front cost of inspecting all $215,000$ units. It is

considering an alternative internal inspection plan that will cost only $$3\mathrm{.}50$ per car seat inspected.

During the internal inspection, the alternative technique will detect only $2\mathrm{.}5\%$ of the $215,000$ car

seats that have stitching problems. The other $1\mathrm{.}5\%$ will be detected after the car seats are sold and

shipped. What are the total costs of quality for the alternative technique?

What factors other than cost should Secure Travel consider before changing inspection techniques?