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The Nothern distrubtion started to analyse the quality costs for the last three years. In start the Qulaity Cost audit report was prepared for the last three years . year 1 ( year 0) and after two years ( Year 2) data is given as following in connection to different quality costs.
Factors
Year 0 (5)
Year 2 151
Sales
6,000000
9,000,000
Turning
20.000
90.000
Quality Palnning
86.000
Other Qulaity Improvement
40.000
60.000
Supplier Evaulation
30.000
Testing
100.000
120.000
Quality performance Measurement
10.000
Supplier Nfonitring
Customer SUrryCS
Rework & Reject Reinspection & testing
150,000 30,000
55.000 35,000
Equipment Failure
50.000
30,000
Downtime
50,000
20,000
Product Liabaility Insurance
250.000
70.000
Warrenty Repairs
Customer Lesses (Estimated)
1400.000
600.000
Required
Question 1. Classify the cost as Appraisal, Preventive, Internal & external failure.
Question 2. Compute quality cost as a percentage of sales for each of the duration . By how much has profit increased because of quality improvements?
Question 3. Assuming that quality costs can be reduced by 7.2 % of year 2 quality cost furher at year 5 , how much additional profit is available through quality improvements (assume that sales revenues will remain the same)?
Question 4. Prepare a quality cost report for year 2 .
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