Question

The inspection costs and repair costs are $8.00 and $2.00, respectively. Of the 5,000 shoes inspected last year, 3% were found to have problems with the cleats. Another 2% of the 5,000 shoes had problems with the cleats but were not detected during the internal inspection. Defective shoes were sold and shipped back to Golf Excellence and repaired. Shipping costs and repair costs per shoe are $10.00 and $4.00, respectively. Negative publicity will result in a loss of future contribution margin of $50.00 for each external failure.

Provide the following

a Appraisal cost

b Internal failure cost

c Out of pocket failure cost

d Opportunity cost of external failure

e Total cost of quality control

Answer 1