Problem 1 - The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.
- Retesting of reworked products
- Downtime due to quality problems
- Analysis of the cause of defects in production
- Depreciation of test equipment
- Warranty repairs
- Lost sales arising from a reputation for poor quality
- Quality circles
- Rework direct manufacturing labor and overhead
- Net cost of spoilage
- Technical support provided to suppliers
- Audits of the effectiveness of the quality system
- Plant utilities in the inspection area
- Reentering data because of keypunch errors
Problem 2 - For supply item ABC, Andrews Company has been ordering 125 units based on the recommendation of the salesperson who calls on the company monthly. A new purchasing agent has been hired by the company who wants to start using the economic-order-quantity method and its supporting decision elements. She has gathered the following information:
| Annual demand in units |
250 |
| Days used per year |
250 |
| Lead time, in days |
10 |
| Ordering costs |
$100 |
| Annual unit carrying costs |
$20
|