B. Tradeoffs with Quality Costs. Consider the following problem. Banga, Inc. is a startup company engaged in the production of a biofertilizer. It has a sales of 8 million and quality costs of 1.6 million. Consistent with their vision of sustainability by reducing wastes and preventing risks, it is embarking on a major quality improvement program. During the next three years, Banga intends to attack failure costs by increasing its appraisal and prevention costs. The "right" prevention activities will be selected, and appraisal costs will be reduced according to the results achieved. For the year 2023, management is considering six specific activities: quality training, process control, product inspection, supplier evaluation, prototype testing, and re-design of two major products. To encourage managers to focus on reducing non-value-added quality costs and select the right activities, a bonus pool is established relating to the reduction of quality costs. The bonus pool is equal to 10 per cent of the total reduction in quality costs. Current quality costs and the costs of these six activities are provided in the table below. Each activity is added sequentially so that its effect on the cost categories can be assessed. For example, after quality training is added, the control costs increase to 320, 000, and the failure costs drop to 1, 040, 000. Even though the activities are presented sequentially, they are totally independent of each other. Thus, only beneficial activities need to be selected. Control Costs 1. Current quality costs Quality training Process control Product inspection Supplier evaluation Prototype testing Engineering re-design 2. ( 160,000 320,000 520,000 600,000 720,000 960,000 1,000,000 a. The reduction in quality costs Failure Costs 1,440,000 1,040,000 Identify the control activities that should be implemented, and calculate the total quality costs associated with this selection. Assume that an activity is selected only if it increases the bonus pool. Given the activities selected in (1), calculate the following 720,000 656,000 200,000 120,000 40,000 b. The percentage distribution for control and failure costs. How do you compare this with the current scenario? What are your insights about this change? The amount of bonus pool for 2023 c.