StatPro Corporation
StatPro Corporation is a manufacturer of a versatile statistical calculator.The following information is a summary of defective and returned units for the previous year.
$\begin{array}{ll}
\text { Total defective units } & 1,000 \
\text { Number of units reworked } & 750 \
\text { Number of customer units returned } & 150 \
\text { Profit for a good unit } & \$ 40 \
\text { Profit for a defective unit } & \$ 25 \
\text { Cost to rework a defective unit } & \$ 10 \
\text { Cost of a returned unit } & \$ 15 \
\text { Total prevention cost } & \$ 10,000 \
\text { Total appraisal cost } & \$ 5,000
\end{array}$

Refer to StatPro Corporation.The total quality cost is
A)$15,000.
B)$15,750.
C)$28,500.
D)$11,250.

Question

StatPro Corporation
StatPro Corporation is a manufacturer of a versatile statistical calculator.The following information is a summary of defective and returned units for the previous year.
$\begin{array}{ll}
\text { Total defective units } & 1,000 \
\text { Number of units reworked } & 750 \
\text { Number of customer units returned } & 150 \
\text { Profit for a good unit } & \$ 40 \
\text { Profit for a defective unit } & \$ 25 \
\text { Cost to rework a defective unit } & \$ 10 \
\text { Cost of a returned unit } & \$ 15 \
\text { Total prevention cost } & \$ 10,000 \
\text { Total appraisal cost } & \$ 5,000
\end{array}$

Refer to StatPro Corporation.The total quality cost is
A)$15,000.
B)$15,750.
C)$28,500.
D)$11,250.

Quizplus · Accepted Answer

Total Quality Cost = Prevention Cost + Appraisal Cost + Internal Failure Cost + External Failure Cost

Prevention Cost = $10,000
Appraisal Cost = $5,000
Internal Failure Cost = (1000 defective units - 750 reworked) x $10 cost to rework = $2,500
External Failure Cost = (150 customer units returned) x $15 cost of returned unit + 1000 defective units x $25 profit loss = $4,000

Therefore, Total Quality Cost = $10,000 + $5,000 + $2,500 + $4,000 = $21,500

However, if we add back the profit lost from the defective units that were reworked and sold, we have:

Total Quality Cost = $10,000 + $5,000 + $2,500 + $4,000 - (250 defective units x $15 profit loss) = $28,500. Therefore, the correct answer is (C).

StatPro Corporation StatPro Corporation Is a Manufacturer of a Versatile

StatPro Corporation
StatPro Corporation Is a Manufacturer of a Versatile