what is the cost of quality calculate 10 of the average ba

what is the cost of quality? ( calculate)

10 % of the average banks customers eave per year

21% of these customer leave due to \"poor quality\"

the average bank customers yields $121 per year gross profit

the average cost to acquire new customers is $150 per year

the bank has aprox 200,000 customers

Solution

Cost of quality would mean loss due to poor quality.

The consequence of poor quality is Customer Leaving the bank.

The consequence of a customer leaving the bank is :

Thus cost of “Poor Quality” per customer per year

= Loss of profit + Cost of acquiring new customer

= $121 + $150

= $271

Number of customers leaving per year = 10% of total customers bank has = 10% of 200,000 = 20,000

Number of customers leaving due to poor quality = 21% of customers leaving per year = 21% of 20,000 = 4200

Thus , Cost of quality

= Cost of poor quality per customer per year x Number of customers leaving due to poor quality

= $271 x 4200

= $1138200

COST OF QUALITY = $1138200