In 2019 a manufacturing company instituted a Total Quality Management (TQM) program and one year later produced the report shown below:
Summary of Cost of Quality (COQ) Report
(in thousands)
$\begin{array}{lrrrc}
& 2019 & 2020 & \% \text { Change } \
\text { Prevention costs } & \$ 200 & \$ 300 & +50 \
\text { Appraisal costs } & 210 & 315 & +50 \
\text { Internal failure costs } & 190 & 114 & -40 \
\text { External failure costs } & 1.200 & 621 & -48\
\text { Total COQ }&\$1,800&\$1,350&-25
\end{array}$Based on the above report, which one of the following statements is most likely correct?
A) An increase in conformance costs resulted in a higher-quality product, and therefore, resulted in a decrease in non-conformance costs.
B) An increase in inspection costs was solely responsible for the decrease in total quality costs.
C) Quality costs such as scrap and rework decreased by 48 percent.
D) Quality costs such as returns and repairs under warranty decreased by 40 percent.
E) Non-conformance costs increased by 50 percent and conformance costs decreased by approximately 47 percent.

Question

In 2019 a manufacturing company instituted a Total Quality Management (TQM) program and one year later produced the report shown below:
Summary of Cost of Quality (COQ) Report
(in thousands)
$\begin{array}{lrrrc} 
& 2019 & 2020 & \% \text { Change } \
\text { Prevention costs } & \$ 200 & \$  300 & +50 \
\text { Appraisal costs } & 210  & 315 & +50 \
\text { Internal failure costs } & 190 & 114 & -40 \
\text { External failure costs } & 1.200  & 621 & -48\
\text { Total COQ }&\$1,800&\$1,350&-25
\end{array}$Based on the above report, which one of the following statements is most likely correct?
A) An increase in conformance costs resulted in a higher-quality product, and therefore, resulted in a decrease in non-conformance costs.
B) An increase in inspection costs was solely responsible for the decrease in total quality costs.
C) Quality costs such as scrap and rework decreased by 48 percent.
D) Quality costs such as returns and repairs under warranty decreased by 40 percent.
E) Non-conformance costs increased by 50 percent and conformance costs decreased by approximately 47 percent.

Quizplus · Accepted Answer

The report shows an increase in prevention and appraisal costs (conformance costs) and a decrease in internal and external failure costs (non-conformance costs), indicating that investing in quality improvement (higher conformance costs) led to a reduction in failures and defects (lower non-conformance costs).

In 2019 a Manufacturing Company Instituted a Total Quality Management