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In: Operations Management

Below are the quality costs data for a company for 2014 & 2015 2014 2015 Prevention...

Below are the quality costs data for a company for 2014 & 2015 2014 2015 Prevention $90,000 $110,000 Appraisal $50,000 $62,000 Internal Faliure $40,000 $34,000 External Faliure $62,000 $60,000 Sales: $5,100,000 $5,350,000 A) whats the precentage change in the total quality index between 2014 & 2015 B) What is the percentage change in the precention quality index between 2014 & 2015 C) What is the percentage change in the internal faliure quality index between 2014 & 2015 ? D) Do you think this company is on the right track investing more in quality improvements? Please explain using the above data.

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QUALITY COSTS

2014

2015

Prevention

$90,000

$110,000

Appraisal

$50,000

$62,000

Internal Failure

$40,000

$34,000

External Failure

$62,000

$60,000

SALES

$5,100,000

$5,350,000

A) percentage change in the total quality index between 2014 & 2015:

TOTAL QUALITY INDEX = TOTAL QUALITY COSTS/SALES

2014

2015

Total Quality costs

$242,000

$266,000

Sales

$5,100,000

$5,350,000

total quality index

0.04745

0.04972

% change

4.78%

B) Prevention Quality Index = Prevention Cost/Sales

Prevention

$90,000

$110,000

SALES

$5,100,000

$5,350,000

Prevention quality index

0.0176471

0.0205607

Percentage change

16.51%

C) Internal Failure quality Index = Internal failure costs/ Sales

Internal Failure

$40,000

$34,000

SALES

$5,100,000

$5,350,000

internal Failure quality index

0.0078431

0.0063551

Percentage change

-18.97%

D) Yes, the company is on the right track, investing more in quality improvements, as after investing more in quality improvements (higher prevention and appraisal costs) the cost of poor quality (internal and external failure) is decreasing.

Prevention

$90,000

$110,000

Appraisal

$50,000

$62,000

Cost of Achieving Good Quality=

$140,000

$172,000

SALES

$5,100,000

$5,350,000

Quality index

0.027451

0.0321495

% change

17.12%

Internal Failure

$40,000

$34,000

External Failure

$62,000

$60,000

Cost of Poor Quality

$102,000

$94,000

SALES

$5,100,000

$5,350,000

Quality Index

0.02

0.0175701

% change

-12.15%

A negative percentage change in the cost of poor quality index indicates the quality investments have brought down the cost of poor quality.

Formulae Used:

keosha answered 6 months ago
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