Question

Sammy, Inc. manufactures motor scooters. For each of the following examples of quality cost, indicate which of the following quality cost categories each example represents: prevention costs, appraisal costs, internal failure costs, or external failure costs.

 1. Preventive maintenance on machinery

 2. Direct materials, direct labor, and manufacturing overhead incurred to rework a defective scooter that is detected in-house through inspection.

 3. Lost profits form lost sales if the company's reputation is hurt because customers previously purchased a poor- quality scooter.

 4. Cost of inspecting raw materials, such as chassis and wheels.

 5. Working with suppliers to achieve on- time delivery of defect-free raw materials.

 6. Cost of warranty repairs on a scooter that malfunctions at a customer's location.

 7. Cost of testing durability of vinyl.

 8. Cost to reinspect reworked scooters.

Answer 1

1. Prevention costs

a. Preventive maintenance on machinery

2. Appraisal costs

a. Cost of inspecting raw materials such as chassis and wheels

b. Working with supplier to achieve on time delivery of defect free raw materials

c. Cost of testing durabilty of vinyl

3. Internal failure costs

a. Direct materials , direct labour, and manufacturing overhead incurred rework, a defective scooter that is detected in house through inspection

b. Cost to reinspect reworked scooter

4. External failure costs

a. Lost profits from lost sales if the company's reputation is hurt because customers previously purchased a poor quality scooter

b. Cost pf warranty repair on a scooter that malfunctions at a customer's location