Reference no: EM13487462

Wharfedale manufactures high-quality speakers. Suppose Wharfedale is considering spending the following amounts on a new quality program:

Additional 20 minutes of testing for each speaker	$   600,000
Negotiation with and training suppliers to obtain higher-quality materials and  on-time delivery	300,000
Redesigning the speakers to make them easier to manufacture	1,400,000

Wharfedale expects this quality program to save costs as follows:

Reduced warranty repair costs	$   200,000
Avoid inspection of raw materials	400,000
Rework avoided because of fewer defective units	650, 000

 

It also expects this program to avoid lost profits from the followings:

Lost sales due to disappointed customers	$   850,000
Lost production time due to rework	300,000

1)      Classify each of these costs into one of four categories of quality costs (prevention, appraisal, internal failure, external failure)

2)      Should Whardale implement the quality program? Give your reasons.