Chapter 19, Problem 19.19E

Costs of quality analysis. Adirondack Company makes chairs for outside living spaces. The company has been working on improving quality over the last year and wants to evaluate how well it has done on costs-of-quality (COQ) measures. Here are the results;

Annual COQ Report, Adirondack Company

	2016	2017
Supplier evaluation	$ 5,000	$ 5,500
Scrap	$ 7,500	$ 5,900
Warranty repair costs	$ 9,980	$ 7,960
Design engineering	$ 4,475	$ 6,775
Inspection	$ 3,500	$ 4,600
Rework	$ 8,980	$ 5,800
Total COQ	$ 39,435	$ 36,535
Total Revenue	$500,000	$575,000

1. 1. Identify the costs-of-quality category (prevention, appraisal, internal failure, and external failure) for each of these costs.

Required

1. 2. Prepare a COQ report by calculating the costs of quality for each category and the ratio of each COQ category to revenues and total quality costs.
2. 3. Based on the results of requirement 2, would you conclude that Adirondack’s quality program has been successful? Prepare a short report to present your case.