The Nothern distrubtion started to analyse the quality costs for the last three years. In start the Qulaity Cost audit report was prepared for the last three years . year 1 ( year 0) and after two years ( Year 2) data is given as following in connection to different quality costs.

Required

1. Classify the cost as Appraisal, Preventive, Internal & external failure.

2. Compute quality cost as a percentage of sales for each of the duration . By how much has profit increased because of quality improvements?

3. Assuming that quality costs can be reduced by 7.2 % of year 2 quality cost furher at year 5 , how much additional profit is available through quality improvements (assume that sales revenues will remain the same)? 4. Prepare a quality cost report for year 2 .

Factors Sales Traning Quality Palnning Other Qulaity Improvement Supplier Evaulation Testing Quality performance Measurement Supplier Monitring Customer Survyes Rework & Reject Reinspection & testing Equipment Failure Downtime Product Liabaility Insurance Warrenty Repairs Customer Losses (Estimated) Year 0 (S) 8,000,000 20,000 20,000 40,000 30,000 100,000 10,000 60,000 10,000 150,000 30,000 50,000 50,000 250,000 120,000 1400,000 Year 2 (S) 9,000,000 90,000 86,000 60,000 40,000 120,000 60,000 40,000 30,000 55,000 35,000 30,000 20,000 70,000 100,000 600,000 Factors Sales Traning Quality Palnning Other Qulaity Improvement Supplier Evaulation Testing Quality performance Measurement Supplier Monitring Customer Survyes Rework & Reject Reinspection & testing Equipment Failure Downtime Product Liabaility Insurance Warrenty Repairs Customer Losses (Estimated) Year 0 (S) 8,000,000 20,000 20,000 40,000 30,000 100,000 10,000 60,000 10,000 150,000 30,000 50,000 50,000 250,000 120,000 1400,000 Year 2 (S) 9,000,000 90,000 86,000 60,000 40,000 120,000 60,000 40,000 30,000 55,000 35,000 30,000 20,000 70,000 100,000 600,000