Business Solutions Corporation Business Solutions Corporation is a manufacturer of a versatile statistical calculator. The following information is a summary of defective and returned units for the previous year.
Refer to Business Solutions Corporation. The total quality cost is
A) $15,000.
B) $15,750.
C) $28,500.
D) $11,250.

Question

Business Solutions Corporation Business Solutions Corporation is a manufacturer of a versatile statistical calculator. The following information is a summary of defective and returned units for the previous year.
 Refer to Business Solutions Corporation. The total quality cost is
A) $15,000. 
B) $15,750. 
C) $28,500. 
D) $11,250.

Quizplus · Accepted Answer

The total quality cost is calculated as the sum of prevention costs, appraisal costs, internal failure costs, and external failure costs.

Prevention costs: 
- Design quality into the product: $4,500 
- Training quality control personnel: $1,500 
Total prevention costs: $6,000

Appraisal costs: 
- Inspection: $2,000 
- Testing: $1,500 
- Vendor rating costs: $1,500 
Total appraisal costs: $5,000

Internal failure costs: 
- Scrap and rework costs: $5,000 
- Downtime and idle capacity: $1,500 
- Material review: $1,000 
Total internal failure costs: $7,500

External failure costs: 
- Customer returns and allowances: $5,000 
Total external failure costs: $5,000

Total quality cost: 
= Prevention costs + Appraisal costs + Internal failure costs + External failure costs 
= $6,000 + $5,000 + $7,500 + $5,000 
= $28,500

Business Solutions Corporation Business Solutions Corporation Is a Manufacturer of a Versatile