Consider the following data for Sue Company: Net sales $14,000 Costs of quality: Prevention 800 Appraisal 1,000 Internal failure 400 External failure 600 Compute the following quality ratios for Sue Company: a. Total costs of quality as a percentage of
sales b. Ratio of costs of conformance to total costs of quality c. Ratio of costs of nonconformance to total costs of quality d. Costs of nonconformance as a percentage of sales
Preliminary calculations:
Cost of conformance: $800 + $1,000 = $1,800
Cost of nonconformance: $400 + $600 = 1,000
Total costs of quality $2,800
a. Total costs of quality as a percentage of sales:
$2,800 ¸ $14,000 = 20%
b. Ratio of costs of conformance to total costs of quality:
$1,800 ¸ $2,800 = 0.64 to 1
c. Ratio of costs of nonconformance to total costs of quality:
$1,000 ¸ $2,800 = 0.36 to 1
d. Costs of nonconformance as a percentage of sales:
$1,000 ¸ $14,000 = 7.14%
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