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IiN D O https://newconnect.mheducation.com/flow/connect.html M McGraw-Hill Connect Myjab Math PirnacieNettix Hulu ework Mowiesurt I Home YouTube G Traductor Help Save & Exit Submit Saved Check my work Mercury, Inc., produces cell phones at its plant in Texas. In recent years, the company's market share has been eroded by stiff competition from overseas. Price and product quality are the two key areas in which companies compete in this market. A year ago, the company's cell phones had been ranked low in product quality in a consumer survey. Shocked by this result, Jorge Gomez, Mercury's president, initiated an intense effort to improve product quality. Gomez set up a task force to implement a formal quality improvement program. Included on this task force were representatives from the Engineering, Marketing, Customer Service, Production, and Accounting departments. The broad representation was needed because Gomez believed that this was a companywide program and that all employees should share the responsibility for its success. After the first meeting of the task force, Holly Elsoe, manager of the Marketing Department, asked John Tran, production manager what he thought of the proposed program. Tran replied, "I have reservations. Quality is too abstract to be attaching costs to it and then to be holding you and me responsible for cost improvements. I like to work with goals that I can see and count! I'm nervous about having my annual bonus based on a decrease in quality costs; there are too many variables that we have no control over Mercury's quality improvement program has now been in operation for one year. The company's most recent quality cost report is shown below Mercury Inc.Explanation / Answer
Last Year This year Particulars Amount ($) Percentage of Total Production Cost Percentage of Total Quality Cost Amount ($) Percentage of Total Production Cost Percentage of Total Quality Cost (A) (B=Coloumn A/Total production Cost (C=Coloumn A/TotalQuality Cost D (E=Coloumn D/Total production Cost (F=Coloumn D/TotalQuality Cost Prevention costs: Machine maintenance 210 5.11% 23.05% 140 3.10% 24.60% Training suppliers 5 0.12% 0.55% 15 0.33% 2.64% Quality circles 25 0.61% 2.74% 80 1.77% 14.06% (a) Total prevention costs 240 5.84% 26.34% 235 5.21% 41.30% Appraisal costs: Incoming inspection 30 0.73% 3.29% 22 0.49% 3.87% Final testing 155 3.77% 17.01% 92 2.04% 16.17% (b) Total appraisal costs 185 4.50% 20.31% 114 2.53% 20.04% Internal failure costs: Rework 110 2.68% 12.07% 62 1.37% 10.90% Scrap 62 1.51% 6.81% 50 1.11% 8.79% (c) Total internal failure costs 172 4.18% 18.88% 112 2.48% 19.68% External failure costs: Warranty repairs 62 1.51% 6.81% 23 0.51% 4.04% Customer returns 252 6.13% 27.66% 85 1.88% 14.94% (d) Total external failure costs 314 7.64% 34.47% 108 2.39% 18.98% (e) Total quality cost(a+b+c) 911 100.00% 569 100.00% Total production cost 4110 100.00% 4510 100%