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Appendix 2

6 T Co manufactures toy cars and train sets. Over the last year, there has been
an increase in products failing final quality checks. Failed products have no
value to the company as the rework costs are not economic. Over the last year,
failure rates have gone from 2% to 6% resulting in lost revenues from hundreds
of units of production not sold on to customers. Failure rates do now appear
steady at 6%.

Management are already assessing actual quality achieved in detail by
inspecting raw materials and production output. A review of the main production
operation has revealed nothing that might explain the increased failure rate. The
quality control department itself has not yet been reviewed.

Which of the following costs may now increase in order for T Co to find
the reason for the increased failure rates? Select all that apply.

A Prevention costs

B Quality circle costs

C Appraisal costs

D Internal failure costs

E External failure costs

7 V Co is a food manufacturer with a complex supply chain including farmers in
developing countries who provide V with cocoa and other raw materials.
Recently, a large NGO published a damning report on the supply chains of the
world’s biggest food producers. The organisations were ranked by the NGO on
their treatment of farmers, land, women, workers, water, climate and overall
transparency.

V Co was found to have a particular lack of transparency and the report
concluded that it was difficult to fully evaluate V’s supply chain.

In response, V Co published details of new policies that required their suppliers
to better manage water pollution, biodiversity and greenhouse gas emissions,
stating that these policies would greatly improve their ranking in the water, land
and climate change categories.

The shareholders of V Co are now placing pressure on the directors to publish
more information on the ethical management of their supply chain. It has been
suggested they should devise a ‘code of ethics’ which details how they interact
with and manage the supply chain.

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