Costs of quality. (CMA, adapted) Osborn, inc., produces cell phone equipment. Amanda Westerly, Osborn's president, decided to devote more resources to the improvement of product quality after learning that her company had been ranked fourth in product quality in a 2011 survey of cell phone users. Osborn's quality-improvement program has now been in operation for 2 years, and the cost report shown here has recently been issued.
|Semi-Annual COQ Report, Osborn, inc. (in thousands)|
|Total prevention costs||531||788||683||521|
|Total appraisal costs||436||451||391||257|
|Internal failure costs|
|Total internal failure costs||353||330||234||180|
|External failure costs|
|Total external failure costs||776||599||333||253|
|Total quality costs||$2,096||$2,168||$1,641||$1,211|
For each period, calculate the ratio of each COQ category to revenues and to total quality costs.
Based on the results of requirement 1, would you conclude that Osborn's quality program has been successful? Prepare a short report to present your case.For each period, calculate the ratio of each COQ category to revenues and to total quality costs.
Based on the 2011 survey, Amanda Westerly believed that Osborn had to improve product quality. In making her case to Osborn management, how might westerly have estimated the opportunity cost of not implementing the quality-improvement program?