Baker Enterprises Implemented a Total Quality Management (TQM) Program at the Beginning

Baker Enterprises implemented a total quality management (TQM) program at the beginning of 20 x 1, closely monitoring amounts spent on prevention cost, appraisal cost, internal failure cost, and external failure cost. By the end of 20 x 3, Baker noted a significant improvement in the quality of its finished-goods production, with management sensing that the firm was close to "optimum results from both a quality and expenditure perspective." The quality improvement, coupled with favourable ratings in Consumer Reports, has led to a sizable boost in sales volume.
Required:
A. Present two examples of each of the following: prevention costs, appraisal costs, internal failure costs, and external failure costs.
B. Baker's TQM program is functioning as expected from an operational perspective. In view of this situation, what has likely happened (increase, decrease, or no effect) to:
1. The amount spent on total quality costs from 20 x 1 through 20 x 3.
2. The amount of hidden costs incurred by the company from 20 x 1 through 20 x 3.
3. The percentage of quality expenditures on prevention and appraisal costs relative to the sum of internal and external failure costs.
4. The amount of effort expended on appraisal efforts if the company has gone somewhat overboard in its prevention programs.

Correct Answer:

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A. Prevention: Quality training, reliabi...

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