The CEO of

JoeJoe

Snacks Corp. is concerned about the amount of resources currently spent on customer warranty claims. Each box of snacks is printed with the following logo: "Satisfaction guaranteed or your money back." Since the number of claims is high, she would like to evaluate what costs are being incurred to ensure the quality of the product.

The following information was collected from various departments within thecompany:

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Requirement 1. Prepare a Costs of Quality report. In addition to listing the costs by category, determine the percentage of the total costs of quality incurred in each cost category. (Round the percentage to the nearest whole percent.)

Costs of Quality Report for		Total Costs	Percentage of Total Costs
Joe Snackfoods		of Quality	of Quality (Rounded)
Prevention Costs:
Total prevention costs				%
Appraisal Costs:
Total appraisal costs				%
Internal Failure Costs:

Requirement 2. Do any additional subjective costs appear to be missing from the report?

Because the company has warranty returns and has had a product recall, the company may suffer

a reputation for poor quality products

high employee turnover

. If so, they are probably

losing employees from high job stress

losing profits from losing sales

. Unsatisfied

customers will be reluctant to buy from the company again

employees will be reluctant to continue employment

. This report does not include an estimate of the

increased costs as a result of hiring replacement workers

lost profits arising from a reputation for poor-quality products

.

Requirement 3. What can be learned from the report?

The Costs of Quality report shows that very little is being spent on

appraisal and external failure

internal failure and external failure

prevention and appraisal

prevention and external failure

, which is probably why the

appraisal and external failure

internal failure and external failure

prevention and appraisal

prevention and external failure

costs are so high. It appears that the company is

inspecting the product at the end of the production process

inspecting the product half-way through the production process and not again at the end of the process

not inspecting the product at all

. Perhaps that is the reason their

appraisal

external failure

internal failure

prevention

costs are so high.

The CEO should use this information to develop quality initiatives in the areas of

appraisal and external failure

internal failure and external failure

prevention and appraisal

prevention and external failure

. Such initiatives

should increase

should reduce

future

appraisal and external failure

internal failure and appraisal

internal failure and external failure

costs.

Cost of disposal of rejected products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		$11,000
Preventative maintenance on factory equipment. . . . . . . . . . . . . . . . . . . . . .		$7,000
Production loss due to machine breakdowns. . . . . . . . . . . . . . . . . . . . . . . . . . . .		$16,250
Inspection of raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		$7,000
Warranty claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		$405,000
Cost of defective products found at the inspection point. . . . . . . . . . . . . . . . . . .		$80,000
Training factory personnel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		$17,750
Recall of Batch #59374. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		$222,000
Inspecting products when halfway through the production process. . . . . . . . . .		$59,000