Question

Quality control issues If the company's apprasial costs are $100,000, internal failure costs are $250,000, and external failure costs are $400,000, how to estimate total quality costs using the multiplier method?

Answer 1

The multiplier method can be used to estimate total quality costs. In this case, the appraisal costs are $100,000, internal failure costs are $250,000, and external failure costs are $400,000. By summing these costs and calculating the multiplier, the total quality costs can be estimated as $5,625,000.

Step-by-step explanation:

The multiplier method is a way to estimate total quality costs by considering the different types of costs involved. To calculate the total quality costs using the multiplier method, you need to sum the appraisal costs, internal failure costs, and external failure costs. Then, divide the sum by the appraisal costs to get the multiplier. Finally, multiply the multiplier by the sum of all costs to estimate the total quality costs.

In this case, the appraisal costs are $100,000, internal failure costs are $250,000, and external failure costs are $400,000. The sum of these costs is $100,000 + $250,000 + $400,000 = $750,000.

The multiplier is calculated by dividing the sum of all costs ($750,000) by the appraisal costs ($100,000). So, the multiplier is $750,000 / $100,000 = 7.5.

To estimate the total quality costs, multiply the multiplier (7.5) by the sum of all costs ($750,000). Therefore, the total quality costs estimated using the multiplier method is $750,000 x 7.5 = $5,625,000.