EBK OM
6th Edition
ISBN: 9781305888210
Author: Collier
Publisher: YUZU
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Question
Chapter 15, Problem 13PA
Summary Introduction
Interpretation: Pareto Diagram needs to be made based on the given information.
Concept Introduction: Cost of quality analysis helps to identify the problems in operations and managers can suggest improvement measures based on that. Cost of quality has four categories: Prevention costs, appraisal costs, internal failure costs and external failure costs.
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D.B. Smith Company produces machine tools. The company conducted a cost-of-quality study and found the following:
Cost Category
Amount
Quality equipment design
$
20,000
Scrap
333,000
Inspection and retest
330,000
Customer returns
80,000
Supplier quality surveys
8,000
Repair
82,000
What quality cost categories should each of these costs be associated with? What does a Pareto analysis reveal? The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.
Questions
1. Classifying the D.B. Smith Company cost elements into the appropriate cost-of-quality categories, calculate the total costs in each category and their percentages of the total and cumulative percentages. Round your answers for the total costs to the nearest dollar and round your answers for the percentages to two decimal places.
Quality Cost Category
Amount
Percent of Total
Cumulative…
In your own words, describe cost of quality (COQ) and why an organization should be managing COQ.
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