For supply item abc, andrews company has been ordering 125 units

Problem 1 – The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs.

Retesting of reworked products
Downtime due to quality problems
Analysis of the cause of defects in production
Depreciation of test equipment
Warranty repairs
Lost sales arising from a reputation for poor quality
Quality circles
Rework direct manufacturing labor and overhead
Net cost of spoilage
Technical support provided to suppliers
Audits of the effectiveness of the quality system
Plant utilities in the inspection area
Reentering data because of keypunch errors

Problem 2 – For supply item ABC, Andrews Company has been ordering 125 units based on the recommendation of the salesperson who calls on the company monthly. A new purchasing agent has been hired by the company who wants to start using the economic-order-quantity method and its supporting decision elements. She has gathered the following information:

Annual demand in units


Days used per year


Lead time, in days


Ordering costs


Annual unit carrying costs


Determine the EOQ, average inventory, orders per year, average daily demand, reorder point, annual ordering costs, and annual carrying costs.

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