should clarke implement the new quality program give your reason 556832

Classifying quality costs and using these costs to make decisions

Clarke, Inc., manufactures door panels. Suppose Clarke is considering spending the following amounts on a new total quality management (TQM) program:

Strength testing one item from each batch of panels

$ 62,000

Training employees in TQM

25,000

Training suppliers in TQM

38,000

Identifying suppliers who commit to on time delivery of

perfect quality materials

56,000

Clarke expects the new program would save costs through the following:

Avoid lost profits from lost sales due to disappointed customers

$ 94,000

Avoid rework and spoilage

60,000

Avoid inspection of raw materials

55,000

Avoid warranty costs

20,000

Requirements

1. Classify each cost as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.

2. Should Clarke implement the new quality program? Give your reason.

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