Question

Homework: Ch 4 HW Score: 0 of 1 pt S4-16 (similar to) 8 of 8 (5 complete) HW Score: 48.72%, 3. Question H Terrordomo manufactures high-quality speakers. Suppose Terrordome is considering spending the following amounts on a new quality program: (Click the icon to view the information.) Terrordome expects this quality program to save costs as follows: FF (Click the icon to view the information) It also expects this program to avoid lost profits from the following: (Click the icon to view the information.) 1. Classify each of these costs into one of the four categories of quality (prevention, appraisal, internal failure, external failure). 2. Should Terrordome implement the quality program? Give your reasons 1. First classify each of these costs into one of the four categories of quality costs, then prepare a cost-benefit analysis of the proposed quality program based on the four categories identified. (Use a minus sign or parentheses for savings amounts.)

Answer 1

Based on attached summary, it results in net cost (i.e.) additional cost by implementing this quality program.Thus it is recommended for Terrodome not to implement this program. But the net cost is minimal, which if Terrodome save prevention cost by further negotiating with suppliers or saving little cost in redesigning the speaker, then can consider implementing it; because through this program, quality product reaches end customer. Over a period of time, it could contribute in increasing the sales as well. Additionally, expected increase in sales also has to be considered while deciding this factor.

590,000 1,406,000 750,000 -404,000 Prevention cost: Negotiating with and training suppliers to obtain higher quality materials and ontime delivery Redesigning the speakers to make them easier to manufacture Appraisal cost: Additional 20 minutes of testing for each speaker Savings on inspection of raw materials Internal failure cost: Savings on rework Savings on lost profits from lost production due to rework External failure cost: Savings on warranty repair cost Savings on lost profit from lost sales due to disappointed customers Net cost (benefit) from implementing quality program -656,000 -308,000 -207,000 -859,000 312,000