The CEO of Salty Snackfoods is concerned about the amount of resources currently spent on customer warranty claims. Each box of snacks is printed with the guarantee: “Satisfaction guaranteed or your money back.” Since the claims are so high, she would like to evaluate what costs are being incurred to ensure the quality of the product. The following information was collected from various departments within the company:
Warranty claims.................................................................................... $420,000
Cost of defective products found at the inspection point....................... 94,000
Training factory personnel.................................................................... 26,000
Recall of Batch #59374......................................................................... 175,000
Inspecting products when halfway through the production process....... 55,000
Cost of disposing of rejected products................................................... 12,000
Preventive maintenance on factory equipment....................................... 7,000
Production loss due to machine breakdowns......................................... 15,000
Inspection of raw materials................................................................... 5,000
Requirements
1. Prepare a Cost of Quality Report. In addition to listing the costs by category, determine the percentage of the total costs of quality incurred in each cost category.
2. Do any additional subjective costs appear to be missing from the report?
3. What can be learned from the report?