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Fundamentals of Cost Accounting - 3rd Edition

In your response, you are to interpret the following graph:
Quality Costs in Millions of Dollars 2007 2008
9 External Failure
8 External Failure
7 Internal Failure
5 Internal Failure
4 Appraisal
2 Appraisal
1 Prevention
0 Preventtion

Demonstrate in your response that you understand the implications of the quality costs identified in the graph. What will a company learn from this graph, and what types of decision-making would that information support?


Solution Preview

The graph shows that the increase in prevention costs was more than offset by the reduction in external failure costs. In other words, the costs of slowing down the process, adding a bit extra wire, or sharpening the knives more often (or whatever they did to try to prevent errors), ...

Solution Summary

Your tutorial is 190 words and explains what each of the four parts of the cost of quality are (in everyday terms) and then explains how to interpret this graph. The response also mentions a cost not on this graph that is important to this interpretation.