Photon makes photocopying machines which earned an operating income of $24 Million on revenues of $ 300 million last year. Photon determines the cost of quality by adapting the activity-based costing approach.

Photon's Market Research Department has estimated lost sales of 2,000 photocopying machines during the year because of external failures. The total estimated contribution margin lost on those machines is $12 Million.

Compute the Percentage of Cost of Capital on Total Revenue after including the opportunity costs.

What are your recommendations for drastic reduction in the Cost of Quality from next year.

Description	Rate	Quantity	Total Cost in USD
Prevention Costs
- Design Engineering	$80/hr	40,000 hrs	32,00,000
- Process Engineering	$60/hr	45,000 hrs	2700000
Total Preventive Costs			59,00,000
Appraisal Costs
- Inspection	$40/hr	240,000 hrs	96,00,000
Total Appraisal Costs			96,00,000
Internal Failure Costs
- Rework	$100/hr	100,000 hrs	1,00,00,000
Total Internal Failure Costs			1,00,00,000
External Failure Costs
- Customer Support	$50/hr	12,000 hrs	6,00,000
- Transportatation	$240/load	3,000 loads	7,20,000
- Warranty Repairs	$110/hr	120,000 hrs	1,32,00,000
Total External Failures			1,45,20,000
Total Cost of Quality			4,00,20,000