Question

The manager at East Coast Manufacturing organizes costs to prepare the Costs of Quality report. The manger compiled the following​ data: Employee training $ 166 comma 000 Warranty costs $ 195 comma 000 Rework $ 270 comma 000 Product testing $ 170 comma 000 Cost of rejected units $ 30 comma 000 Sales return processing costs $ 35 comma 000 Lost profits from lost sales $ 720 comma 000 Inspection at State I of Production $ 100 comma 000 Preventative maintenance $ 100 comma 000 Improved equipment $ 135 comma 000 What of the following cost is the total cost of quality the manager should use to report the costs in the internal failure cost​ category?
A. $195,000
B. $300,000
C. $270,000
D. $697,000
E. $200,000

Answer 1

Answer:

Compute the total cost of quality using the equation as shown below:

Cost of Quality=Cost of Poor Quality+Cost of Good Quality

=($270,000+$195,000+$20,000+$720,000+35,000)

+($164,000+$100,000+$104,000+$170,000+145,000)  

=$1,240,000+$683,000

=$1,923,000

Thus, the total cost of quality is $1,923,000.

Compute the total internal failure cost using the equation as shown below:

Total Internal Failure Cost=Cost of Rework+Cost of Rejected Units

=$270,000+$20,000

=$290,000

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