Question

The Ajax Corporation is proud of its quality- control program. It employs two quality engineers at an average $ 35,000 salary for quality planning and engineering, test method development, and quality training. Every item is 100 percent inspected, using eight inspectors earning an average salary of $ 30,000 per year. Nevertheless, in a typical year about 100 items averaging $500 in value must be scrapped, and another 200 require rework costing an average of $ 75.00. Customer service costs estimated at $ 15000 annually are generated by still more defects that slip through. Analyze the firm’s quality cost situation, and make recommendations.

Answer 1

Here we go.

Overall, these quality costs add up to a significant amount, with the cost of quality engineers, inspectors, and rework totaling $335,000 per year, and customer service costs adding another $15,000.

To improve the firm's quality cost situation, some possible recommendations might include:

1. Review the quality-control process to identify potential areas of improvement and reduce the number of defects that slip through. This could involve implementing new test methods, training employees on quality techniques, or improving the quality planning process.

2. Consider automating certain aspects of the quality-control process, such as inspections or testing, to reduce the need for manual labor and potentially lower labor costs.

3. Implement a continuous improvement program to encourage employees to identify and address quality issues as they arise.

4. Consider using third-party quality assurance firms to supplement the company's in-house quality-control efforts and provide an independent assessment of the company's quality processes.

5. Invest in technology or equipment that can help to improve the quality of products and reduce the need for rework or scrapping.