Reference no: EM132991188

Question - Childsafe Capsules produces car seats for children from newborn to two years old. The company is worried because one of its competitors has recently come under public scrutiny due to product failure. Historically, Childsafe Capsule'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 internally last year and 9% were found to have problems with the stitching in the straps. 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 Childsafe Capsule and repaired.

Shipping costs are $7, and repair costs are $0.75. However, the out-of-pocket expenses (shipping and repair) are not the only costs of defects that remained undiscovered by the internal inspection. For 20% of the external failure, negative word-of-mouth will result in a loss of $300 for each of the 20% of the units with external failures.

Childsafe Capsules is concerned with the high up-front costs of inspecting all 250,000 units. It is considering an alternative internal inspection plan that will cost only $1.00 per car seat inspected. During the internal inspection, the alternative technique will detect 5% of the 250,000 car seats that have stitching problems. The other 7% will be detected after the car seats are sold and shipped.

Required -

a. Which of the four costs of quality are being applied by Childsafe Capsules?

b. What are the current total costs of quality for this product?

c. What are the total costs of quality for the alternative technique?

d. What factors other than cost should Childsafe Capsule consider before changing inspection techniques?