Paralogic Corp $\begin{array}{lccc} \text { Warranty repair costs } & \$ 200,000 \\\text { Reliability engineering } & 400,000 \\\end{array}$

Paralogic Corp. produces two microchips that are popular in the with laptop computer manufacturers: Model A and Model $\begin{array}{lccc} \text { Warranty repair costs } & \$ 200,000 \\\text { Reliability engineering } & 400,000 \\\end{array}$

$\begin{array}{|l|r|}\hline \text { Rework at Paralogic's manufacturing plant } & 80,000 \\\hline \text { Manufacturing inspection } & 50,000 \\\hline \begin{array}{l}\text { Transportation costs to customer sites to fix } \\\text { problems }\end{array} & 25,000 \\\hline \text { Quality traming for employees } & 80,000 \\\hline\end{array}$ Quality cost reports revealed the following about Model B: $\begin{array}{lr}\text { Prevention costs } & 82.3 \% \\\text { Appraisal costs } & 4.7 \% \\\text { Internal failure costs } & 6.0 \% \\\text { External failure costs } & 7.0 \% \\\text { Total quality costs } & 100.0 \%\end{array}$ Finally, the company's accounting department reported that the percentage of sales revenues consumed by quality costs is lower for Model B than for Model A.
Required:
A. Classify the costs that relate to Model A as prevention, appraisal, internal failure, or external failure.
B. Using your answer in requirement "A," compute prevention, appraisal, internal failure, and external failure costs as a percentage of Model A's total quality costs.
C. Comment on your findings, noting whether the company is "investing" its quality expenditures differently for the two synthesizers.

Correct Answer:

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A. Warranty repair costs External failur...

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