Question

Cost of Quality:

Cost Element	Amount
Proofreading	$800,000
Quality planning	15,000
Press downtime due to system failure	300,000
Bindery waste due to process failure	80,000
Checking & inspection	55,000
Customer complaint remakes	30,000
Printing plate revisions due to process failure	40,000
Quality improvement projects	25,000
Other waste due to system failure	60,000
Correction of typo errors	250,000

a. Allocate the above items into the proper “Cost of Quality” categories.

b. Determine the total in each category and the overall total cost.

c. Find the percentage of each category.

d. Comment on the current costs data and what needs to be done next to improve.

Answer 1

Ans:

(a) Allocation of costs into Cost of Quality Category:

Cost Element	Amount	Cost of Quality Category
Proofreading	$800000	Appraisal Cost
Quality Planning	$15000	Prevention Cost
Press downtime due to system failure	$300000	Internal Failure Cost
Bindery waste due to process failure	$80000	Internal Failure Cost
Checking & inspection	$55000	Appraisal Cost
Customer complaint remakes	$30000	External Failure Cost
Printing plate revisions due to process failure	$40000	Internal Failure Cost
Quality improvement projects	$25000	Appraisal Cost
Other waste due to system failure	$60000	Internal Failure Cost
Correction of typo errors	$250000	Internal Failure Cost
Total	$1655000

(b) Total in each category and the overall total cost:

Cost of Quality Category	Amount ($)
Prevention Cost	$15000
Appraisal Cost ($800000+$55000+$25000)	$880000
Internal Failure Cost ($300000+$80000+$40000+$60000+$250000)	$730000
External Failure Cost	$30000
Total Cost of Quality	$1655000

(c) Percentage of each category:

Cost of Quality Category	Amount ($)	Percentage of total cost
Prevention Cost	$15000	$15000/$1655000 = 0.91%
Appraisal Cost	$880000	$880000/$1655000 = 53.17%
Internal Failure Cost	$730000	$730000/$1655000 = 44.11%
External Failure Cost	$30000	$30000/$1655000 = 1.81%
Total Cost	$1655000

(d) Comment on Current cost data and suggestions for improvement:

From the above working, we can see that, cost of quality is highest in Appraisal cost. Appraisal cost help companies to regulate customer and spend now to avoid unnecessarily high costs later. Internal failure cost is the second highest. It means, we need to focus mainly on inernal failure cost as these cost can decrease the productivity and credibility of the company

The cost of quality can be improved by-

1. Cut down on scrap and rework.

2. Reduce customer complaints by addresing and listening to their complaints

3. Product traceability.

4. Periodic Internal quality audit.

5. Discrepncy documentation.

6. Proper workflow of routine tasks.

7. Process inspection and improvement.

5.