Seymour Inc. has prepared the following summary quality cost report for 2010:
Prevention costs …………………….$1,560,000
Appraisal costs ……………………… 1,800,000
Internal failure costs ………………… 2,280,000
External failure costs ……………….. 1,680,000
Total quality costs ……………………$7,320,000
The company is actively striving to reduce total quality costs. Its current strategy is to increase spending in one or more quality cost categories in the hope of achieving greater spending cuts in other quality cost categories. Prepare a presentation that answers the following questions.
a. Which spending categories are most susceptible to control by managers? Why?
b. Why is it more logical for the company to increase spending in the prevention cost and appraisal cost categories than in the failure cost categories?
c. Which cost category is the most likely target for spending reductions? Explain.
d. How would the adoption of a TQM philosophy affect the focus in reducing quality costs?