The XYZ Manufacturing Company is evaluating options for spending on product quality and wants tofind the optimal amount to spend on changing its processes to further prevent defects. Its engineershave developed the following estimates:1. DefectsThe current defect rate is 10%.If it invests an additional $10 per unit in prevention costs, the defect rate will drop to 6%;spending $20 per unit on prevention drops the defect rate to 3%; spending $30 per unit dropsthe defect rate to 1.5%; and investing $40 per unit on prevention reduces the defect rate to1%.2. InspectionInspection costs are $5 per unit.Inspection is successful at detecting 98% of defective units; the remaining 2% of defectiveproducts are sold and eventually returned for warranty repairs or replacement at no cost tothe customer.3. Internal failure costs are $400 per defective unit that is detected.4. External failure costs are $1000 per unit returned.5. Current production level is 1 million units.REQUIRED:A. Create and submit a spreadsheet that calculates total quality costs for the existing processand for each of the four options for investing in additional prevention.

The objective of the question is to calculate the total quality costs for the existing process and…

Answered: The XYZ Manufacturing Company is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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