Question

Cost of Quality Analysis

The ABC Company has collected the following cost data for the year:  

          Receiving Inspection $ 15,232

Production Scrap $   32,150

Rejected Products $ 6,200

  Product Design $ 25,422

Customer Adjustment Credit $ 85,654

Online Inspection $ 17,248

Quality Team Meeting $ 7,540

Downgrading Products $ 1,125,328

Customer Need survey $ 3,250

Final test $         25,758

Prototyping $ 136,802  

1. Organize these costs in COQ categories and put any non-QOC data in the NQ category.
2. Compute the ratio of prevention and appraisal costs to failure costs
3. Recommend strategies for reducing the Total Quality Cost.

Answer 1

Answer :

1. Cost of Quality Category :

a) Prevention Costs:

Product Design $ 25,422

Quality Team Meeting $ 7,540

Final test $         25,758

Prototyping $ 136,802

Customer Need survey $ 3,250

b) Aprraisal Costs :

Receiving Inspection $ 15,232

Online Inspection $ 17,248

c) Failure Costs :

Rejected Products $ 6,200

Production Scrap $   32,150

Customer Adjustment Credit $ 85,654

Downgrading Products $ 1,125,328

2. ( Prevention Costs + Appraisal Costs ) / Failure Costs = 231252/1249332 = 18.51%

3. Strategies to reduce total quality costs:

a) Invest in prevention costs i.e., product and process design ;

b) Try to reduce production scrap;

c) Create environment to form quality circle this will reduce formal quality meetings;

d) Apply philip crossby principles of zero defect;

e) Do it right first time, do it right every time;

f) Develop proper method of SQC.

Thanks....