Review Question 16.

Spare capacity relates to various resources: staff time, wards, equipment.

Emergency dept. – reduced waiting times and improved throughput, more time spent on complex cases

Result

 Efforts become effective

 Saving long-term complications

Elective surgery

 Saving staff costs, cleaning and power costs

Improved throughput times

 Reduce bed occupancy

 Reduce laundry and food costs

Exercise 16.21

Non-value adding activities

1. Dentist
 Repairing damaged equipment.
 Searching for up-to-date methods of caring for patients’ teeth.
 Updating the reception area. This doesn’t add value to the services provided to patients.
 Numerous calls or letters to inform patients of appointments. This could be costly if the patient’s
contact details are incorrect.

2. Fashion retailer:
 Resolving customer complaints when products in advertised ‘special offers’ are not
available.
 Returning defective clothes to the manufacturer or ringing the supplier for more
supplies.
 Unpacking stock and putting it on display. Displaying stock can be very time-consuming.
 Repairing a DVD monitor that displays fashion shows. While playing the DVDs would be
value adding to the customer, the need to repair the player is not.

3. University business school:

 Preparing a (tutorial) classroom for group work by moving desks and chairs.
 Students arriving late for lectures, causing repetition of information to some students.
 Contacting students who did not submit in assessment items.
 Fixing or repairing damaged or faulty projector for class presentation.
Problem 16.46

1) Classification of Costs:
External Failure- Warranty Costs
- Transportation Costs to Customer
Sites to Fix Problems
Prevention- Reliability Engineering
- Quality Training for Employees
Internal Failure- Rework at LTL’s Manufacturing
Plant
Appraisal- Manufacturing Inspection

2.) Model ABC

% Cost %
of Sal
$ Quality es
Internal Failure

79,800. 2.2
Rework @ LTL's manufacturing 00 12.09% 2%
External Failure

100,80
Warranty Cost 0.00

44,250.
Transportation to customer 00

145,05 4.0
Total 0.00 21.98% 3%
Appraisal

22,500. 0.6
Inspection 00 3.41% 3%
Prevention

360,00
Reliability Engineering 0.00

52,500.
Quality Training 00
11.
412,50 46
Total 0.00 62.51% %
Total Cost of Quality 100.00% 18.
659,85 33
 0.00 %

3.) Model XYZ

$
Internal Failure
Rework @ LTL's
manufacturing 60,000.00
External Failure
Warranty Cost 6,000.00
Transportation to customer 22,500.00

Total 28,500.00
Appraisal
Inspection 37,500.00
Prevention
Reliability Engineering 450,000

Quality Training 75,000.00

Total 525,000

Total Cost of Quality 651,000

4). Yes, the company has been investing its quality expenditures differently for the two machines. LTL is
spending more on prevention and appraisal for Model XYZ—almost 87 per cent of the total quality
expenditures, compared to approximately 66 per cent for Model ABC.