Instructions

  1. Discuss the Traditional Model of quality costs. What are the different components of quality costs? Draw the graph to show the implications of all the components.

2. At the commencement of 2007, Fiji Viti Industries Corporation, a small scale manufacturer of plastic bottles in Suva, commenced a quality enhancement program. Considerable endeavours were expended to truncate the number of defective units manufactured. By the end of this year, reports from the assistant production manager unveiled that scrap and rework had both gone down. The general manager of the corporation was delighted to hear of the accomplishment but wanted some appraisal of the financial impact of the improvements. To compose this evaluation, the following financial data were obtained for the preceding and current years.

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2007
Sales $13,000,000
Rework 500,000
Scrap 400,000
Quality training 85,000
Product warranty 500,000
Material Inspection 75,000
Products Inspection 142,000
  1. Categorise the costs as internal failure, external failure, appraisal costs and prevention costs.
  2. Develop a quality cost report for 2007.
  3. Provide a quick interpretation of the quality cost report for 2007.

3. Explain emerging COQ model? How is it different from the traditional COQ model? Explain

4. What is meant by ‘costs of quality’? Explain.

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