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 failure cost is
A)$15,000.
B)$13,500.
C)$11,250.
D)$8,250.

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 failure cost is
A)$15,000.
B)$13,500.
C)$11,250.
D)$8,250.

Quizplus · Accepted Answer

The total failure cost includes the costs associated with defective units that are reworked, returned units, and the loss in profit from selling defective units at a lower price. The calculation is as follows:- Cost to rework defective units: 750 units * $10/unit = $7,500- Cost of returned units: 150 units * $15/unit = $2,250- Loss in profit for defective units (not reworked, so 250 units): 250 units * ($40 - $25) = $3,750Adding these costs gives us $7,500 + $2,250 + $3,750 = $13,500.

StatPro Corporation StatPro Corporation Is a Manufacturer of a Versatile

StatPro Corporation
StatPro Corporation Is a Manufacturer of a Versatile