In 2011 a manufacturing company instituted a total quality management (TQM) program producing the report shown below:
Summary COQ Report (in thousands)
|
|
2011
|
2012
|
% Change
|
|
Prevention costs
|
$ 200
|
$ 300
|
+50
|
|
Appraisal costs
|
210
|
315
|
+50
|
|
Internal failure costs
|
190
|
114
|
-40
|
|
External failure costs
|
1,200
|
621
|
-48
|
|
Total COQ
|
$1,800
|
$1,350
|
-25
|
On the basis of this report, which one of the following statements is most likely correct?
a. An increase in conformance costs resulted in a higher-quality product and, therefore, a decrease in nonconformance costs.
b. An increase in inspection costs was solely responsible for the decrease in quality.
c. Quality costs such as scrap and rework decreased by 48 percent.
d. Quality costs such as returns and repairs under warranty decreased by 40 percent.
e. Nonconformance costs increased by 50 percent and conformance costs decreased by approximately 47 percent.