Question

Darrel & Co. makes electronic components. Chris Darrel, the president, recently instructed Vice President Jim Bruegger to develop a total quality control program. “If we don’t at least match the quality improvements our competitors are making,” he told Bruegger, “we’ll soon be out of business.” Bruegger began by listing various “costs of quality” that Darrel incurs. The first six items that came to mind were:

a. Costs incurred by Darrel customer representatives traveling to customer sites to repair defective products, \(13,000.

b. Lost profits from lost sales due to reputation for less-than-perfect products, \)35,000.

c. Costs of inspecting components in one of Darrel’s production processes, \(40,000.

d. Salaries of engineers who are redesigning components to withstand electrical overloads, \)65,000.

e. Costs of reworking defective components after discovery by company inspectors, \(50,000.

f. Costs of electronic components returned by customers, \)70,000.

Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost. Then determine the total cost of quality by category.

Short answer

Total Prevention Cost:$65,000

Total Appraisal Cost: $40,000

Total Internal Failure Cost: $50,000

Total External Failure Cost: $118,000

Step-by-step solution

Prevention Cost

From the given list, followings are the prevention cost and their total –

S.No.	Cost	Amount
d.	Salaries of engineers who are redesigning components to withstand electrical overloads	$65,000
	Total	$65,000

Appraisal Cost

Following are the appraisal cost and their total from the given list –

S.No.	Cost	Amount
c.	Costs of inspecting components in one of Darrel’s production processes.	$40,000
	Total	$40,000

Internal Failure Cost

S.No.	Cost	Amount
e.	Costs of reworking defective components after discovery by company inspectors.	$50,000
	Total	$50,000

External Failure Cost

S.No.	Cost	Amount
a.	Costs incurred by Darrel customer representatives traveling to customer sites to repair defective products.	$13,000
b.	Lost profits from lost sales due to the reputation for less-than-perfect products.	$35,000
f.	Costs of electronic components returned by customers.	$70,000
	Total	$118,000