What are the costs and ethics involved in a recall of surge protectors?

surge-protectorIn October 2013, Schneider Electric recalled 15 million of its SurgeArrest surge protectors.  The models recalled were the series APC 7 and APC 8 (manufactured before 2003.) The company warned at that time that the surge protectors could overheat, smoke, and start a fire.  These surge protectors were manufactured before 2003; between the date of manufacture (pre-2003) and the date of recall (2013), the company received over 700 reports of overheating and melting, 13 reports of injuries, and 55 reports of property damage including a house fire ($916,000 in damages) and a medical facility fire ($750,000 in damages.)

The units that were recalled were sold for between $13 and $50.

If consumers contact the company, they can get their surge protectors replaced.

Questions

1. List some possible examples of the following types of quality costs at Schneider Electric:

  • a. Prevention costs
  • b. Appraisal costs
  • c. Internal failure costs

2. What are some of the external failure quality costs involved with Schneider Electric’s APC 7 and APC 8 surge protectors?

3. Schneider Electric has been criticized for delaying the recall, even though it received over 700 reports of problems.  What rationale(s) do you think the company could make for delaying the recall?  In your opinion, is the recall delay ethical?  Why or why not?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. †Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions. †The YouTube video link below is a narration of the blog post article (no discussion questions are included in the YouTube video; those can be assigned separately.)

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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