The Door Company Manufactures Doors Classify Each Of The

The Door Company Manufactures Doors Classify Each Of The

Problem 1: The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs:

• a. Retesting of reworked products
• b. Downtime due to quality problems
• c. Analysis of the cause of defects in production
• d. Depreciation of test equipment
• e. Warranty repairs
• f. Lost sales arising from a reputation for poor quality
• g. Quality circles
• h. Rework direct manufacturing labor and overhead
• i. Net cost of spoilage
• j. Technical support provided to suppliers
• k. Audits of the effectiveness of the quality system
• l. Plant utilities in the inspection area
• m. Reentering data because of keypunch errors

Problem 2: For supply item ABC, Andrews Company has been ordering 125 units based on the recommendation of the salesperson who calls on the company monthly. A new purchasing agent has been hired to start using the economic order quantity (EOQ) method. She has gathered the following information: annual demand in units 250; days used per year 250; lead time in days 10; ordering costs $100; annual unit carrying costs $20. Determine the EOQ, average inventory, orders per year, average daily demand, reorder point, annual ordering costs, and annual carrying costs.

Question: (TCO 11) Nonfinancial measures for internal quality performance include all but which of the following?

Paper For Above instruction

The first problem requires classifying various quality costs associated with the manufacturing of doors at The Door Company. Understanding the classification of quality costs is crucial for effective quality management, as it helps identify areas for improvement and appropriate resource allocation. The four categories of quality costs are prevention costs, appraisal costs, internal failure costs, and external failure costs. Each cost item in the list must be examined with respect to these categories.

Prevention costs are incurred to prevent defects before they occur. These include activities such as quality circles (g), which promote continuous improvement, and technical support to suppliers (j) to ensure quality inputs. Costs like analysis of defect causes (c) and quality audits (k) also fall under prevention as they help prevent defects through better process understanding and control.

Appraisal costs involve inspecting, testing, or otherwise measuring products to ensure quality before they reach customers. Reworking products (a, h), depreciation of test equipment (d), and utilities in inspection areas (l) facilitate the detection of defects within the process, and thus are appraisal costs.

Internal failure costs occur when defects are detected before products are shipped to customers. Examples include rework labor and overhead (h), spoilage (i), and retesting of reworked products (a). These costs represent the expenses associated with fixing defects found during production or internal quality checks.

External failure costs are associated with defects found after the product has been delivered to the customer, often leading to warranty repairs (e), lost sales due to damage to reputation (f), and excess costs from external failure-related activities. Warranty repairs (e) are classic external failure costs because they occur after shipment when defects are exposed externally.

From the list, downtime due to quality problems (b) is typically an internal failure cost as it affects internal production efficiency. Reentering data due to keypunch errors (m) and plant utilities in inspection areas (l) fall into appraisal due to being part of the measurement process.

In conclusion, classifying each cost helps the company strategically reduce defects and improve overall quality management systems, ultimately leading to better customer satisfaction and reduced costs.

The second problem involves calculating EOQ and related inventory metrics for supply item ABC at Andrews Company. Using the EOQ formula, which balances ordering costs and carrying costs, the company aims at minimizing total inventory costs. Given demand (D) of 250 units per year, ordering cost (S) of $100, carrying cost per unit (H) of $20, and lead time of 10 days, the EOQ can be calculated as:

EOQ = √(2DS / H) = √(2 250 100 / 20) = √(50,000 / 20) = √2,500 = approximately 50 units.

The average inventory is half of EOQ, which is 25 units. The number of orders per year is demand divided by EOQ: 250 / 50 = 5 orders annually. The average daily demand is total demand divided by the number of days: 250 / 250 = 1 unit/day. The reorder point (ROP), considering the lead time, is:

ROP = daily demand lead time = 1 10 = 10 units.

Annual ordering costs equal the number of orders per year multiplied by order cost: 5 $100 = $500. Annual carrying costs are average inventory times unit carrying cost: 25 $20 = $500. The total costs can be minimized using the EOQ decision rule, ensuring efficient inventory management.

Such inventory management strategies help minimize stockouts and overstocking, optimizing operational efficiency. The use of EOQ also supports planning of purchase cycles and ensures the firm maintains adequate supply to meet demand without excessive inventory costs.

The third question from the TCO 11 assessment involves understanding that nonfinancial measures of internal quality performance typically focus on process indicators that do not directly involve monetary calculations. Examples include defect rates, process cycle times, and employee training effectiveness. Therefore, the item that does not belong as a nonfinancial measure for internal quality performance may be:

“Financial costs or dollar amounts associated with defects or rework”—these are financial measures, not nonfinancial.

In summary, nonfinancial internal quality measures are essential for early detection and prevention of defects, fostering a culture of continuous improvement. They offer real-time insights into operational efficiency and product quality, directly influencing customer satisfaction and operational excellence.

References

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