Question

Given the following cost information for company XYZ.

Cost Item	Total for the year
Quality assurance	$	580,000
Equipment maintenance	$	270,000
Product redesign	$	323,000
Product warranty and repair	$	680,000
Product testing and inspection	$	385,000
Training	$	315,000
Process improvement/Kaizen	$	250,000
Material scrap	$	360,000
Rework labor	$	439,000
Incoming materials inspection	$	336,000
After sales customer support	$	215,000
Travel to suppliers/process certification	$	88,000
Travel to customers/problem solving	$	93,000
Calculate the following: a. Total appraisal cost: b. Total prevention cost: c. Total cost of internal failures: d. Total cost of external failure: e. Total cost of quality:

Answer 1

Prevention costs:

Costs incurred to prevent or avoid quality problems. They are planned cost and incurred before actual operation.

Appraisal Costs:

Costs incurred with measuring and monitoring activities related to quality

Internal failure costs:

Costs incurred to remedy defects discovered before the product or service is delivered to customer.

External failure costs:

Costs incurred to remedy defects discovered by the customers.

Prevention Cost
Quality Assurance	$5,80,000
Training	$3,15,000
Product Redesign	$3,23,000
Process Improvement	$2,50,000
Travel to suppliers/process certification	$88,000

Appraisal Cost
Equipment Maintenance	$2,70,000
Product testing and inspection	$3,85,000
Incoming Material Inspection	$3,36,000

Cost of Internal Failure
Material Scrap	$3,60,000
Rework Labour	$4,39,000

Cost of External Failure
Product Warranty and Repair	$6,80,000
After sales customer support	$2,15,000
Travel to customer problem solving	$93,000

Total Quality Cost (Total of all above cost) = $43,34,000