Safe Travel produces car seats for children from newborn to 2 years old. The company is worried because one of its competitors has recently come under public scrutiny because of product failure. Historically, Safe Travel's only problem with its car seats was stitching in the straps. The problem can usually be detected and repaired during an internal inspection. The cost of the inspection is $5.00 per car seat, and the repair cost is $1.00 per car seat. All 200,000 car seats were inspected last year, and 5% were found to have problems with the stitching in the straps during the internal inspection. Another 1% of the 200,000 car seats had problems with the stitching, but the internal inspection did not discover them. Defective units that were sold and shipped to customers needed to be shipped back to Safe Travel and repaired. Shipping costs are $8.00 per car seat, and repair costs are $1.00 per car seat. However, the out-of-pocket costs (shipping and repair) are not the only costs of defects not discovered in the internal inspection. Negative publicity will result in a loss of future contribution margin of $100 for each external failure. Requirement 1. Calculate appraisal cost. The appraisal cost is Requirement 2. Calculate internal failure cost. The internal failure cost is Requirement 3. Calculate out-of-pocket external failure cost. The out-of-pocket external failure cost is Requirement 4. Determine the opportunity cost associated with the external failures. The opportunity cost associated with the external failures is Requirement 5. What are the total costs of quality? The total cost of quality is Requirement 6. What are the total costs of quality for the alternative technique? (Round your answer to the nearest whole dollar.) The total costs of quality for the alternative technique is Requirement 7. What factors other than cost should Safe Travel consider before changing inspection techniques?
Safe Travel produces car seats for children from newborn to 2 years old. The company is worried because one of its competitors has recently come under public scrutiny because of product failure. Historically, Safe Travel's only problem with its car seats was stitching in the straps. The problem can usually be detected and repaired during an internal inspection. The cost of the inspection is $5.00 per car seat, and the repair cost is $1.00 per car seat. All 200,000 car seats were inspected last year, and 5% were found to have problems with the stitching in the straps during the internal inspection. Another 1% of the 200,000 car seats had problems with the stitching, but the internal inspection did not discover them. Defective units that were sold and shipped to customers needed to be shipped back to Safe Travel and repaired. Shipping costs are $8.00 per car seat, and repair costs are $1.00 per car seat. However, the out-of-pocket costs (shipping and repair) are not the only costs of defects not discovered in the internal inspection. Negative publicity will result in a loss of future contribution margin of $100 for each external failure. Requirement 1. Calculate appraisal cost. The appraisal cost is Requirement 2. Calculate internal failure cost. The internal failure cost is Requirement 3. Calculate out-of-pocket external failure cost. The out-of-pocket external failure cost is Requirement 4. Determine the opportunity cost associated with the external failures. The opportunity cost associated with the external failures is Requirement 5. What are the total costs of quality? The total cost of quality is Requirement 6. What are the total costs of quality for the alternative technique? (Round your answer to the nearest whole dollar.) The total costs of quality for the alternative technique is Requirement 7. What factors other than cost should Safe Travel consider before changing inspection techniques?
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Safe Travel produces car seats for children from newborn to 2 years old. The company is worried because one of its competitors has recently come under public scrutiny because of product
failure. Historically, Safe Travel's only problem with its car seats was stitching in the straps. The problem can usually be detected and repaired during an internal inspection. The cost of the inspection
is $5.00 per car seat, and the repair cost is $1.00 per car seat. All 200,000 car seats were inspected last year, and 5% were found to have problems with the stitching in the straps during the internal
inspection. Another 1% of the 200,000 car seats had problems with the stitching, but the internal inspection did not discover them. Defective units that were sold and shipped to customers needed to
be shipped back to Safe Travel and repaired. Shipping costs are $8.00 per car seat, and repair costs are $1.00 per car seat. However, the out-of-pocket costs (shipping and repair) are not the only
costs of defects not discovered in the internal inspection. Negative publicity will result in a loss of future contribution margin of $100 for each external failure.
Requirement 1. Calculate appraisal cost.
The appraisal cost is.
Requirement 2. Calculate internal failure cost.
The internal failure cost is
Requirement 3. Calculate out-of-pocket external failure cost.
The out-of-pocket external failure cost is
Requirement 4. Determine the opportunity cost associated with the external failures.
The opportunity cost associated with the external failures is
EXTE
Requirement 5. What are the total costs of quality?
The total cost of quality is
Requirement 6. What are the total costs of quality for the alternative technique? (Round your answer to the nearest whole dollar.)
The total costs of quality for the alternative technique is.
Requirement 7. What factors other than cost should Safe Travel consider before changing inspection techniques?
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