Harvey Company designs and produces surgical lasers. Its product is brilliantly designed, but the manufacturing process has been plagued by chronic quality control problems. To help address the situation, Harvey formed a cross-functional team of managers that quantified its costs of quality over the last two quarters as follows: Costs (in thousands)
Quarter 1 Quarter 2
Cost of testing equipment $ 270 $ 390
Customer returns of defective goods $ 3,200 $ 200
Downtime due to quality problems $ 600 $ 1,100
Inspection $ 1,700 $ 2,770
Net cost of scrap $ 800 $ 1,300
Product recalls $ 3,500 $ 600
Quality engineering $ 1,080 $ 1,650
Rework labor $ 1,400 $ 1,600
Statistical process control $ 0 $ 270
Supplies used in testing $ 30 $ 40
Systems development $ 120 $ 680
Warranty repairs $ 3,300 $ 2,800
The company’s sales were $95 million in Quarter 1 and $100 million in Quarter 2.
Required:
1. Go to the tab titled Template A
a. For each cost described in cells A6 through A17, choose the correct quality cost classification (i. e., prevention, appraisal, internal failure, or external failure) from the drop-down list that appears when you put the cursor in each of cells B6 through B17.
b. Create formulas in cells D6 through D17 that state each individual cost from Quarter 1 (as shown in cells C6 through C17) as a percent of the first quarter’s total cost of quality (as shown in cell C18). Repeat this process in column G for quarter 2.