Chapter 2.B, Problem 3P

To determine

Cost of quality: The costs that are incurred to avoid, prevent, detect or removes defect from a product are called cost of quality or quality costs. The cost of quality is divided into appraisal costs, prevention costs, external failure costs, and internal failure costs

Prevention cost: Prevention costs are the costs that are incurred to prevent or avoid defects in the product.

Appraisal Cost: Appraisal costs are the costs that are incurred for testing and inspecting the products to identify the defects before delivering them.

Internal failure cost: Internal failure costs are the costs that are incurred to remove the identified defects from products before delivering them.

External failure cost: External failure costs are the costs that are incurred to remove defects from products that have already been delivered to the customers.

Quality cost report: The report which details the cost of appraisal costs, prevention costs, external failure costs and internal failure costs is called quality cost report.

Product cost: Product cost is the cost of manufacturing or purchasing a product.

1. The company’s quality cost report for the data given in the required format and determine if the company’s quality improvement program is successful or not.
2. Identify the effect of the improvement program in the production department.
3. Measure the cost of not implementing the quality improvement program for Mercury Inc.