(Control of quality costs; team activity) The following summary numbers have been taken from a quality cost report of North Carolina Fine Furniture Inc., for 2000. The firm manufactures a variety of Early American furniture produ
|
Prevention costs |
$2,500,000 |
|
Appraisal costs |
1,500,000 |
|
Internal failure costs |
1,500,000 |
|
External failure costs |
500,000 |
|
Total quality costs |
$6,000,000 |
The company is actively seeking to identify ways to reduce total quality costs. The company’s current strategy is to increase spending in one or more quality cost categories in hopes of achieving greater spending cuts in other quality cost categories. In a team of three or four individuals, prepare an oral presentation to answer the following questions:
a. Which spending categories are most susceptible to control by managers? Why?
b. Why is it more logical for the company to increase spending in the prevention cost and appraisal cost categories than in the failure cost categories?
c. Which cost category is the most likely target for spending reductions? Explain.
d. How would the adoption of a TQM philosophy affect the focus in reducing quality costs?