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Mercury, Incorporated, 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 an intense 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 because Gomez believed that this was a 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. "I have reservations. Quality is too abstract to be attaching costs to it and then to be holding you and me responsible for cost improvements, I like to work with goals that I can see and countl l'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. Nercury, incorporated Quality Cost Report (in thousands) Prevent1on costs: Last Year this Year Machine malntenance Iraining suppliers Quality circles Total prevention cost Appeaisal costst Incooling Inspection Final testing Total appraisal cost internal fallure costs: isniork Scrap Total. Internal fallure cost External fallure costs: Warranty repairs custoner returns Total exterial fallure cost Totel quelity cost Total production cost \begin{tabular}{rr} 5350 & $150 \\ 7 & 15 \\ 23 & 70 \\ \hline 380 & 235 \\ \hline 55 & 20 \\ \hline 170 & 54 \\ \hline 225 & 112 \\ \hline 140 & 66 \\ 70 & 60 \\ \hline 210 & 126 \\ \hline 76 & 25 \\ \hline 280 & 55 \\ \hline 356 & 110 \\ \hline$1,271 & $583 \\ \hline$4,250 & $4,650 \\ \hline \end{tabular} As they were reviewing the report, Elsoe asked Tran what he now thought of the quality improvement program. Tran replied. Fim felieved that the new quality improvement program hasnt hurt our bonuses. but the program has increased the workioad in the Production Department. It is true that customer refurns are way down, but the ceil phones that were returned by customers to retail outlets were rarely tient back to us for rework. Required: 1. Expand the company's quality cost report by showing the costs in both years as percentages of both total production cost and iotal. quality cost. Note: Round your percentage answers to 1 decimol ploce (i.e 0.1234 should be entered as 12.3)

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