Lecture 18 - Quality control Flashcards
(!) Describe quality costing in general & its reasons
General:
- Unnecessary, avoidable cost = Higher price = Less competitive
- Part of continuous improvement
- COQ = Cost of quality: Waste time & money if too high quality
- TQM is further development
Reasons for quality costs:
- Make quality-related activities manageable
- Quality as business parameter
- Identify problem areas
- Identify possible cost reduction
- Identify opp. to improve
- Allow performance measurement
- Poss. Internal comparison: Products, processes & departments
Describe the four levels of quality control
General:
- Spread in the organization
- TQM: Today institutionalized, but not discussed that much
(!) Describe quality costs, quality related costs & quality costing
Quality costs:
- Expenditure with product/service
- Incurred by producer, user & community
Quality related costs:
- Expenditure from PAF categories
- Involve more departments
- Not completely controllable
- Categorization of quality costs in relation of steps in PLC
Quality costing:
- Continuous process
- Avoid failure
- Minimizing appraisal costs
- Optimizing prevention costs
- Both traditional & hidden costs
(!!!!!!) Describe the PAF categorization model
General:
- CALC: TQC% & TC %
- Quality cost categorization
- Analyze reasons
- Post-collection exercise
- For reporting purpose
__________
Prevention costs:
- Cost to investigate, prevent or reduce defect
- If increased it can reduce other
- Here we add value
- Avoid mistake: Increase quality
Appraisal costs:
- Cost to evaluate achievement of quality requirement
- Add little value to product
- E.g. Cost of verification & control quality loop stages
- Control & inspect failure
Internal failure costs:
- Cost arising within firm
- Due to non-conformity / defect
- Squeeze to prevention costs
- Not focus: Do right first time
- Reworking
- Before left company
- Add little value to product
- Can reduce appraisal costs
- Eg. Scrap, rework, retest, redesign & re-inspection
External failure costs:
- Costs arising after left company
- Due to non-conformity / defect
- Not focus: Do right first time
- Squeeze to prevention costs
- Serious: Can hurt implication
- More costly to direct & correct
- Special: Lost opportunity cost
- Eg. Warranty, replacement, losses & penalty
(!) Describe the advantages & limitations of the PAF categorization model
Advantages:
- Easy to understand
- Prompt rational approach
- Report gets orders & uniformity
- Universal acceptance
- Provide keywords
Limitations:
- Activities often not match accounting system info
- Focus on prevention & appraisal components > Failure cost
- Difficult categorizing & quantifying
- Post-collection exercise
- For quality assurance personnel
- Weak cost vs. improvement link
- Many cost never considered by quality cost checklists & guides
- Dont account for many non-manufacturing area
Describe the role of the accountant in quality costing
General:
- Should be involved
- More positive towards it lately
- Ensure it is right & make sense
Support quality process:
- Provide cost cons. info of quality improvements: PAF
Contribute with accounting virtue:
- Correspondence: Quality cost must correspond to quality IRL
- Coherence: User must understand quality & quality relation
Describe the economist approach to quality costing
Critique:
- Not align w. TQM: Continuous quality improvement: Seek ideal
- Curves & optimal level not DM relevant: Constant stretch
(?) Describe the change in quality cost over the years
Earlier:
- Appraisal & failure categories
- Eg. Assurance, scrap rework, testing & warranty costs
__________
Now:
General:
- Still parameters not usually noted or measured in MA reporting
- Still hard to relate to ABC
Costs:
Design, implementation, operation & maintenance of QMS
Cost of resources committed to continuous quality improvement
Cost of product & service failures:
- Warranty
- Guarantee
- Complaints
- Lost customer goodwill
- Additional customer service
Cost of system failures:
- Lost items
- Delays
- Missed meetings
- Scrap
- Late delivery: Qual.-deli. dilemma
- Added transport costs
Non-value added activity
Waste
(?) Describe lost opportunity cost
General:
- Can categorize as external failure
- “Value of benefit sacrificed in for alternative course of action”
Examples:
- Lost capacity
- Losses by substandard product
- Unplanned substitution of mat.
- Loss of custom, goodwill, sales opportunities, revenues or profit
- Utilization of sales personnel
- Cost effective maintenance of processing equipment
(!) Show the calcculations
