1.) Chihooli Inc., manufactures radiation-shielding glass panels. Suppose Chihoo

Question

1.) Chihooli Inc., manufactures radiation-shielding glass panels. Suppose Chihooli is considering spending the following amounts on a new total quality management (TQM) program:
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Stregnth-testing one item from each batch of panels..........................$65,000
Training employees in TQM......................................................... 30,000
Training suppliers in TQM........................................................... 40,000
Identifying preferred suppliers who commit to on-time
delivery of perfect quality materials........................................... 60,000
_________________________________________________________________________

Chihooli expects the new program would save costs through the following
_________________________________________________________________________
Avoid lost profits from lost sales due to disappointed customers............ $90,000
Avoid rework and spoilage........................................................ 55,000
Avoid inspection of raw materials............................................... 45,000
Avoid warranty costs.............................................................. 15,000
_________________________________________________________________________
a. Classify each item as a prevention cost, an appraisal cost, an internal failure cost
or an external failure cost.
b. Should Chihooli implement the new quality program? Give reason

Explanation / Answer

yes

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