Classifying Costs of Quality Paul Miller, controller of Meta Medical, has reviewed the costs of quality records for the past years. Meta Medical provides calibration and maintenance services for sophisticated medical equipment in the Midwest. Training, testing, and service calls are major costs that seem to grow each year. Miller is trying to measure possible ways to reducing the total costs of quality as part of a review of all processes and activities within the firm. He assembled the following costs: Parts warranty, induding replacement labor 92,000 Emergency trips to service dient machines 86,000 Rental of substitute equipment to cover client downtime 43,000 Training of repair technicians (time and travel) 196,000 Inspection of finished repairs 45,000 Testing and certifications of calibration equipment 15,000 Development of client testing processes and diagnostics 31,500 Miller is aware of two contracts that were cancelled this past year because of client complaints about poor service response. These contracts totalled $60,000. Requirements: 1. Classify these costs according to prevention, appraisal, internal failure, and external failure. 2. Comment on the difficulty that Paul Miller likely has in evaluating these and other costs that might be costs of quality.
Classifying Costs of Quality Paul Miller, controller of Meta Medical, has reviewed the costs of quality records for the past years. Meta Medical provides calibration and maintenance services for sophisticated medical equipment in the Midwest. Training, testing, and service calls are major costs that seem to grow each year. Miller is trying to measure possible ways to reducing the total costs of quality as part of a review of all processes and activities within the firm. He assembled the following costs: Parts warranty, induding replacement labor 92,000 Emergency trips to service dient machines 86,000 Rental of substitute equipment to cover client downtime 43,000 Training of repair technicians (time and travel) 196,000 Inspection of finished repairs 45,000 Testing and certifications of calibration equipment 15,000 Development of client testing processes and diagnostics 31,500 Miller is aware of two contracts that were cancelled this past year because of client complaints about poor service response. These contracts totalled $60,000. Requirements: 1. Classify these costs according to prevention, appraisal, internal failure, and external failure. 2. Comment on the difficulty that Paul Miller likely has in evaluating these and other costs that might be costs of quality.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Classifying Costs of Quality
Paul Miller, controller of Meta Medical, has reviewed the costs of quality records for the
past years. Meta Medical provides calibration and maintenance services for
sophisticated medical equipment in the Midwest. Training, testing, and service calls are
major costs that seem to grow each year. Miller is trying to measure possible ways to
reducing the total costs of quality as part of a review of all processes and activities
within the firm. He assembled the following costs:
Parts warranty, including replacement labor
92,000
Emergency trips to service client machines
86,000
Rental of substitute equipment to cover client downtime
43,000
Training of repair technicians (time and travel)
196,000
Inspection of finished repairs
45,000
Testing and certifications of calibration equipment
15,000
Development of client testing processes and diagnostics
31,500
Miller is aware of two contracts that were cancelled this past year because of client
complaints about poor service response. These contracts totalled $60,000.
Requirements:
1. Classify these costs according to prevention, appraisal, internal failure, and
external failure.
2. Comment on the difficulty that Paul Miller likely has in evaluating these and other
costs that might be costs of quality.
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