Question

Clason, Inc. manufactures door panels. Suppose Clason is considering spending the following amounts on a new total quality management (TQM) program (Click the icon to view the information. Clason expects the new program would save costs through the following: (Click the icon to view the information.) Read the requirements. e cost or Requirement 1. Classify each cost as a prevention cost, an appraisal cost, an internal failu an external failure cost. Cost Type of Quality Cost Strength-testing one item from each batch of panels

Answer 1

Answer is given below

Strength-testing one item from each batch of panels Training employees in TQM. Training suppliers in TQM. Identifying preferred suppliers that commit to on-time delivery of perfect quality materials Appraisal cost Prevention cost Prevention cost Prevention cost Avoid lost profits from lost sales due to disappointed customers Avoid rework and spoilage Avoid inspection of raw materials Avoid warranty costs External failure costs Internal failure cost Appraisal cost External failure costs Total cost savings due to TQM Program Total TQM Cost Savings due to TQM program $221,000 $192,000 $29,000 Conclusion: Clason Inc. Is advised to take up the TQM program since it gives net benefit to the firm Working notes: $27,000 $39,000 Cost of TQM Program Particulars of Cost Prevention Cost Training employees in TQM Training suppliers in TQM Identifying preferred suppliers that commit to on-time delivery of perfect quality materials Total Preventive Costs Appraisal Cost Strength-testing one item from each batch of panels $58,000 $124,000 $68,000 $68,000 Total Appraisal Costs Internal Failure Costs Total Internal Failure Costs External Failure Costs Total External Failure Costs Total Quality cost $192,000 Cost savings due to TQM program Particulars of Cost Prevention Cost Amount Total Preventive Costs Appraisal Cost inspection of raw materials Total Appraisal Costs $57,000 $57,000 Internal Failure Costs rework and spoilage Total Internal Failure Costs $63,000 $63,000 External Failure Costs lost profits from lost sales due to disappointed customers warranty costs Total External Failure Costs $86,000 $15,000 $101,000 Total Quality cost $221,000