D.B. Smith Company produces machine tools. The company conducted a cost-of-quality study and found the following:Cost Category AmountQuality equipment design$20,000Scrap 333,000Inspection and retest 330,000Customer returns 80,000Supplier quality surveys 8,000Repair 82,000What quality cost categories should each of these costs be associated with? What does a Pareto analysis reveal? The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Questions1. Classifying the D.B. Smith Company cost elements into the appropriate cost-of-quality categories, calculate the total costs in each category and their percentages of the total and cumulative percentages. Round your answers for the total costs to the nearest dollar and round your answers for the percentages to two decimal places.Quality Cost Category Amount Percent of Total Cumulative PercentageInternal failure Appraisal External failure Prevention Total ### Pareto Chart OverviewThe Pareto Chart is used to identify and prioritize problems or causes of problems in a process. Below are the details pertaining to a set of cost categories, along with their associated amounts.#### Cost Categories and Amounts- **Quality equipment design**: $20,000- **Scrap**: $333,000- **Inspection and retest**: $330,000- **Customer returns**: $80,000- **Supplier quality surveys**: $8,000- **Repair**: $82,000#### Quality Cost CategoriesThe table also categorizes the quality costs into different categories:1. **Internal failure** 2. **Appraisal**3. **External failure**4. **Prevention**Each category should be filled with the corresponding amount, percent of total, and cumulative percentage, although these specific figures are not filled in within the presented table.### Explanation of the DiagramThe chart includes spaces for calculating the "Percent of Total" and the "Cumulative Percentage" of each quality cost category, which are vital for constructing the Pareto principle, indicating that a select few causes often account for a large percentage of the problem. This technique assists in prioritizing actions based on their potential impact.

Answered: D.B. Smith Company produces machine…

The expenses of avoiding, identifying, and resolving product quality concerns are known as quality costs. Quality expenses aren't only about raising a product's perceived worth to a greater level. Quality, on the other hand, entails designing and delivering a product that fulfills a customer's expectations. As a result, if a consumer pays a low price for a car, he will not anticipate leather seats or air conditioning, but he will expect the vehicle to function adequately. In this situation, quality is defined as a functional vehicle rather than a luxurious experience. Quality expenses are divided into four categories: The expense of prevention is high. In order to avoid a quality issue, you must pay a preventative cost. It is the most affordable sort of quality cost and is thus highly recommended. Proper staff training in product assembly and statistical process control (for recognizing processes that are starting to produce faulty items), as well as a solid product design and supplier certification, may all help reduce costs. Because scrap is never produced, a focus on prevention tends to lower preventive scrap expenses. The price of an appraisal. An assessment cost is spent in order to avoid a quality issue, similar to how a preventative cost was expended. This is accomplished via a number of inspections. The most cost-effective method is to have production employees evaluate both incoming and leaving components to and from their workstations, which detects errors sooner than other inspection methods. Other appraisal expenses include the destruction of items as part of the testing procedure, test equipment depreciation, and testing personnel monitoring. Internal failure has a price tag. When a faulty product is created, an internal failure cost is incurred. Scrapped or reworked items are examples of this. This cost includes the cost of reworking products. External failure has an expense. When a faulty product is manufactured, you also pay an external failure cost, but this time it's significantly higher since it also includes the expenses of product recalls, warranty claims, field service, and maybe even legal costs connected with consumer lawsuits. It also includes a cost that is difficult to quantify: the cost of losing clients.Quality Cost Category Amount Percent of Total Cumulative % Internal Failure 415000 48.65 48.65 Appraisal 330000 38.69 87.34 External failure 80000 9.38 96.72 Prevention 28000 3.28 100.00 Total 853000 100.00

Quality Cost Category

Amount

Percent of Total

Cumulative Percentage

Internal failure

External failure

Prevention

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Cost Category		Amount
Quality equipment design	$	20,000
Scrap		333,000
Inspection and retest		330,000
Customer returns		80,000
Supplier quality surveys		8,000
Repair		82,000