Question

Tuscany Co. has the following information available:

Quality engineering of products                           $20,000

Quality training of employees                                 $2,000

Net cost of scrap                                                     $30,000

Rework labor                                                             $4,500

Warranty repairs                                                   $100,000

Product recalls                                                      $200,000

Liability arising from defective products       $1,000,000

Maintenance of test equipment                             $44,000

Quality improvement projects                               $55,000

Setups for testing                                                      $3,000

Supplies used in testing                                            $5,500

Downtime caused by defects                                 $70,000

Disposal of defective products                              $80,000

Prepare the quality cost report for the Tuscany Co. by classifying above costs into four types of quality costs.

Answer 1

Quality Cost Report for Tuscany Company
Quality Cost category	Annual cost
Prevention Costs:
Quality engineering of products	20000
Quality training of employees	2000
Quality improvement projects	55000	77000
Appraisal Costs:
Setups for testing	3000
Supplies used in testing	5500
Maintenance of test equipment	44000	52500
Internal Failure Costs:
Net cost of scrap	30000
Rework labor	4500
Downtime caused by defects	70000
Disposal of defective products	80000	184500
External Failure Costs:
Warranty repairs	100000
Product recalls	200000
Liability arising from defective products	1000000	1300000
Total Quality Costs:		1614000

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