Preparing a cost of quality report. The following information shows last year's quality-related costs for the Renewal Company:
Item Amount
Quality engineering $500,000
Warranty claims 2,345,000
Product liability lawsuits 4,500,000
Research of customer needs 75,000
Maintenance of test equipment 350,000
Returned products 1,200,000
Rework costs 1,200,000
Quality training 125,000
Process control monitoring 1,000,000
Inspection of and testing of incoming materials 400,000
Repair costs in the field 850,000
Statistical process control 250,000
Product recalls 2,000,000
Waste 700,000
Net cost of scrap 635,000
Product quality 475,000
Downtime due to defects 125,000
Supplier certification 90,000
Total sales for the year were $100,000,000
a. Prepare a cost of quality report grouping costs into prevention, appraisal, internal failure, and external failure. Also show costs as a percent of sales.
b. Interpret the data and make recommendations to Renwal's management.