MGMT 4630

CoQ Assignment

Read the scenario below and calculate the total cost of Qualityfor last month.

Organize/categorize the individual “line item” costs by each of the four costs of quality. Then calculate the cost for each of the four primary costs of quality and the total cost of quality.

Exercise Objective: To properly identify the four cost of quality and calculate the total cost of quality.

Course Learning Objectives: Use a variety of current industry quality tools for measuring and monitoring quality; Define foundational concepts related to quality and quality management.

UNG Inc., a manufacturer of widgets, has experienced the following in the previous month.

They reported 49 units that failed inspection. Of those 28 units were reworked. Replacement parts for those totaled $250. The labor cost (direct labor + benefits and taxes) for the rework was $300. The cost for reinspection of the reworked units was $200. Additionally, when the bad units were found, production was stopped for 30 minutes to troubleshoot this issue so that it would not continue to occur for subsequent production. The value of the lost production time (labor + benefits/taxes and depreciation recovery by capital equipment) was valued at $550. The remaining 21 were not repairable. The material invested in those units totaled $2100. They were sent to recycling/reclaim where $150 was paid to UNG by the recyclers. The lost value of the invested labor (direct labor + benefits and taxes) was $700. To replace the 21 units that were scrapped, $450 of overtime labor was required.

During last month, a Kiazen improvement “event” (project) occurred using a cross functional team. The employee cost (salaries + benefits/taxes) and project expenses (equipment and materials) totaled $9000.

UNG, Inc. has a person in their Customer Service department who handles customer complaints and issues RMAs (return material authorization). The monthly charge is $1300 to cover the portion of this person’s salary (plus benefits/taxes).

The monthly portion of the salary (plus benefits/taxes) of the inspector who performs receiving inspection (materials received from suppliers) is $3100.

The Procurement Department conducted an audit/assessment of a possible new supplier who could provide improved raw materials. The employee costs (salaries + benefits/taxes) plus travel expenses were

$3600. Additionally, the annual audit of one of UNG’s existing supplier occurred costing $1900 in employee and travel expenses.

There are two (2) full-time inspectors who check finished products and perform in-process audits. The monthly portion of their salaries (plus benefits/taxes) is $5800.

The monthly calibration of equipment cost $350.

Last month, seven (7) products were returned. Of these two (2) units were repaired under warranty at a cost of $200 for materials and labor (for both). The other five (5) were replaced.

The production cost is $400 per unit. All replacement or warranty repaired unit are returned shipped to customer by expedited shipping at a cost of $50 per unit.

The monthly portion of the quality system records-keeper salary (plus benefits/taxes) is $2600.

One department conducted skills training class for three employees. The total cost of the training was $800 plus employee labor costs of $300 (per person).

One customer had installed a widget that failed. UNG, Inc. sent a technician to replace the widget at the customer’s site. The employee costs (salaries + benefits/taxes) plus travel expenses were $2500 plus a new widget (at cost).

Below would be a general idea of a good format (as from accounting).

External Failure Cost

(state item, for example, Warranty repair) $5,000

(Item 2) xxx

(Item 3) xxx

Subtotal for Ext. Failure Cost $x,xxx

Then overall summary, for example:

Total Cost of Quality

Prevention Cost


Appraisal Cost


External Failure Cost


Internal Failure Cost



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