ace University\'s My PaceM Chapter 02 Pre-Built Prob x Getting Started C ezto.mh
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ace University's My PaceM Chapter 02 Pre-Built Prob x Getting Started C ezto.mheducation.com/hm.tpx 10.00 points Mercury, Inc.. produces cell phones at its plant in Texas. In recent years, the company's market share has been eroded by stiff competition from overseas. Price and product quality are the two key areas in which companies compete in this market A year ago the company's cell phones had been ranked low in product quality in a consumer survey Shocked by this result, Jorge Gomez, Mercury's president, initiated a crash effort to improve product quality. Gomez set up a task force to implement a formal quality improvement program. Included on this task force were representatives from the Engineering. Marketing. Customer Service, Production, and Accounting departments. The broad representation was needed bec ause Gomez believed that this was a Accounting departments. The broad repr companywide program and that all employees should share the responsibility for its success After the first meeting of the task force, Holly Elsoe, manager of the Marketing Department, asked John Tran, production manager, what he thought of the proposed program. Tran replied, 1 have reservations Quality is too abstract to be attaching costs to it and then to be holding you and me responsible for cost improvements. 1 like to work with goals that I c an see and count! I'm nervous about having my annual bonus based on a decrease in quality costs; there are too many variables that we have no control over Mercury's quality improvement program has now been in operation for one year The company's most recent quality cost report is shown below Mercury, Inc. Quality Cost Report in thous ands) Last Year This Year $ 340 S 140 75 Prevention costs Machine maintenance Training suppliers Quality circles 6 Total prevention costs 370 Appraisal costs Incoming inspection Final testing 50 165 26 82 Total appraisal costs 215 108 Intemal failure costs 130 68 Scrap Total intenal failure costs Extermal failure costs: 50 198 114 Warranty repairs Customer retuns 278 Total extenal failure costs Total quality cost 120 $ 1,136 $ 567 s 4.240 $4 640 production cost As they were reviewing the report, Elsce asked Tran what he now thought of the quality the report, Elsoe asked Tran what he now thought of the quality improvementExplanation / Answer
Mercury, Inc. Quality Cost Report (in thousands) Last Year This Year Amount Percentage of Total Production Cost Percentage of Total Quality Cost Amount Percentage of Total Production Cost Percentage of Total Quality Cost Prevention costs: Machine maintenance $340 8.01886792 % $29.93 % $140 $3.02 % $24.69 % Training suppliers 6 0.14150943 % $0.53 % 10 $0.22 % $1.76 % Quality circles 24 0.56603774 % $2.11 % 75 $1.62 % $13.23 % Total prevention costs 370 8.72641509 % $32.57 % 225 $4.85 % $39.68 % Appraisal costs: Incoming inspection 50 50/4240*100 % $4.40 % 26 $0.56 % $4.59 % Final testing 165 $3.89 % $14.52 % 82 $1.77 % $14.46 % Total appraisal costs 215 $5.07 % $18.93 % 108 $2.33 % $19.05 % Internal failure costs: Rework 130 3.06603774 % $11.44 % 64 $1.38 % $11.29 % Scrap 68 1.60377358 % $5.99 % 50 $1.08 % $8.82 % Total internal failure costs 198 4.66981132 % $17.43 % 114 $2.46 % $20.11 % External failure costs: Warranty repairs 75 1.76886792 % $6.60 % 36 $0.78 % $6.35 % Customer returns 278 6.55660377 % $24.47 % 84 $1.81 % $14.81 % Total external failure costs 353 8.3254717 % $31.07 % 120 $2.59 % $21.16 % Total quality cost $1,136 26.7924528 $100.00 % $567 $12.22 % $100.00 % Total production cost $4,240 $4,640
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