The Buffalo Machine Works of Boulder, Colorado, was evaluating its cost structure relating to quality costs. In the prior year, the company had lost...

The Buffalo Machine Works of Boulder, Colorado, was evaluating its cost structure relating to quality costs. In the prior year, the company had lost $500,000 in warranty and scrap. They didn't have good numbers for rework costs. In the prior year, they had spent $100,000 training employees in quality tools and $200,000 for quality assurance personnel. Inspection costs were 2% of sales of $50 million. Evaluate these costs and recommend what actions should be taken to upper management. (Hint: The average company loses about 20% of sales due to poor quality.)