Question

Forensic Specialists compiled the following information for its first quarter cost of quality report:

Sales	$	5,600,000
Cost of goods sold	$	3,360,000
Disposing of scrap	$	235,200
Quality training	$	84,000
Inspecting materials on delivery	$	280,000
Performance reviews	$	70,000
Resolving customer complaints	$	31,920
Certifying suppliers	$	140,000

The total cost of external failure activities at Forensic Specialists is:

Multiple Choice

• $420,560.

• $31,920.

• $175,000.

• $117,600.

Answer 1

Solution:

Option B ($31,920) is the correct answer.

Explanation:

The external failure activities are those activities that arise because the company has shipped previously a defective product or offered bad service. Because of this, these costs arise. These costs include the following:

• Warranties
• Replacements
• Resolving Customer Grievances
• Resolving Customer Complaints etc.,

In this case, the external failure activities of Forensic Specialists is only one activity i.e., Resolving customer complaints.

Therefore, the cost of external failure activities at Forensic Specialists is $39,920.