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Costs of quality. (CMA, adapted) Osborn, Inc., produces cell phone equipment. Amanda Westerly, Osborn's president, implemented a quality-improvement program that has now been in operation for 2 years. The cost report shown here has recently been issued. Semi-Annual COQ Report, Osborn, Inc. (in thousands) 6/30/2016 12/31/2016 6/30/2017 12/31/2017 Prevention costs Machine maintenance $ 480 $ 480 $ 440 $ 290 Supplier training Design reviews Total prevention costs Appraisal costs Incoming inspections Final testing Total appraisal costs 21 90 45 35 30 218 198 196 531 788 683 521 109 124 89 55 327 327 302 202 436 451 391 257 Internal failure costs Rework 226 206 166 115 Scrap 127 124 68 65 Total internal failure costs 353 330 234 180 External failure costs Warranty repairs 182 89 70 67 Customer returns 594 510 263 186 Total external failure costs 776 599 333 253 Total quality costs Total revenues $2,096 $8,220 $2,168 $9,180 $1,641 $9,260 $1,211 $9,050

Costs of quality. (CMA, adapted) Osborn, Inc., produces cell phone equipment. Amanda Westerly, Osborn's president, implemented a quality-improvement program that has now been in operation for 2 years. The cost report shown here has recently been issued. Semi-Annual COQ Report, Osborn, Inc. (in thousands) 6/30/2016 12/31/2016 6/30/2017 12/31/2017 Prevention costs Machine maintenance $ 480 $ 480 $ 440 $ 290 Supplier training Design reviews Total prevention costs Appraisal costs Incoming inspections Final testing Total appraisal costs 21 90 45 35 30 218 198 196 531 788 683 521 109 124 89 55 327 327 302 202 436 451 391 257 Internal failure costs Rework 226 206 166 115 Scrap 127 124 68 65 Total internal failure costs 353 330 234 180 External failure costs Warranty repairs 182 89 70 67 Customer returns 594 510 263 186 Total external failure costs 776 599 333 253 Total quality costs Total revenues $2,096 $8,220 $2,168 $9,180 $1,641 $9,260 $1,211 $9,050

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter14: Quality And Environmental Cost Management
Section: Chapter Questions
Problem 16E: In 20x4, Tru-Delite Frozen Desserts, Inc., instituted a quality improvement program. At the end of...
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Based on the 2015 survey, Amanda Westerly believed that Osborn had to improve product quality. In making her case to Osborn management, how might Westerly have estimated the opportunity cost of not implementing the quality-improvement program?

Costs of quality. (CMA, adapted) Osborn, Inc., produces cell phone equipment. Amanda Westerly, Osborn's president, implemented a quality-improvement program that has now been in operation for 2 years. The cost report shown here has recently been issued. Semi-Annual COQ Report, Osborn, Inc. (in thousands) 6/30/2016 12/31/2016 6/30/2017 12/31/2017 Prevention costs Machine maintenance $ 480 $ 480 $ 440 $ 290 Supplier training Design reviews Total prevention costs Appraisal costs Incoming inspections Final testing Total appraisal costs 21 90 45 35 30 218 198 196 531 788 683 521 109 124 89 55 327 327 302 202 436 451 391 257 Internal failure costs Rework 226 206 166 115 Scrap 127 124 68 65 Total internal failure costs 353 330 234 180 External failure costs Warranty repairs 182 89 70 67 Customer returns 594 510 263 186 Total external failure costs 776 599 333 253 Total quality costs Total revenues $2,096 $8,220 $2,168 $9,180 $1,641 $9,260 $1,211 $9,050
Transcribed Image Text:Costs of quality. (CMA, adapted) Osborn, Inc., produces cell phone equipment. Amanda Westerly, Osborn's president, implemented a quality-improvement program that has now been in operation for 2 years. The cost report shown here has recently been issued. Semi-Annual COQ Report, Osborn, Inc. (in thousands) 6/30/2016 12/31/2016 6/30/2017 12/31/2017 Prevention costs Machine maintenance $ 480 $ 480 $ 440 $ 290 Supplier training Design reviews Total prevention costs Appraisal costs Incoming inspections Final testing Total appraisal costs 21 90 45 35 30 218 198 196 531 788 683 521 109 124 89 55 327 327 302 202 436 451 391 257 Internal failure costs Rework 226 206 166 115 Scrap 127 124 68 65 Total internal failure costs 353 330 234 180 External failure costs Warranty repairs 182 89 70 67 Customer returns 594 510 263 186 Total external failure costs 776 599 333 253 Total quality costs Total revenues $2,096 $8,220 $2,168 $9,180 $1,641 $9,260 $1,211 $9,050
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