Question

Dream Rider produces car seats for children from newborn to 2 years old. The company is worried because one of its competitors has recently come under public scrutiny because of product failure. Historically, Dream Rider's only problem with its car seats was stitching in the straps. The problem can usually be detected and repaired during an internal inspection. The cost of the inspection is $4, and the repair cost is $0.75. All 250,000 car seats were inspected last year and 9% were found to have problems with the stitching in the straps during the internal inspection. Another 3% of the 250,000 car seats had problems with the stitching, but the internal inspection did not discover them. Defective units that were sold and shipped to customers needed to be shipped back to Dream Rider and repaired. Shipping costs are $7, and repair costs are $0.75. However, the out-of-pocket costs (shipping and repair) are not the only costs of defects not discovered in the internal inspection. For 20% of the external failures, negative word of mouth will result in a loss of sales, lowering the following year's sales by $300 for each of the 20% of units with external failures. 1. Calculate prevention costs. 2. Calculate appraisal costs. 3. Calculate internal failure costs. 4. Calculate external failure costs. 5. Calculate total cost of quality.