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Quality
I. Overview
- Increase demand (and market share) through heightened customer satisfaction.
- Significantly lowers costs.
- Creates goodwill.
- Increase employee expertise.
- Performance.
- Aesthetics.
- Features.
- Reliability.
- Durability.
- Serviceability.
- Fitness to use.
- Perceived quality.
- Conformance.
Zero-defects approach.
Robust quality.
Total Quality Management (TQM).
Through a philosophy of the following:
- Doing it right the first time.
- Employee training and empowerment.
- Promotion of teamwork.
- Continuous improvement of processes.
- Attention to the satisfaction of the internal and external customers.
- It emphasizes the supplier’s relationship with the customer.
- Identifies customer needs.
- Recognizes that everyone in a process is at some time a customer or supplier of someone else, within or outside of the organization.
- Education and self-improvement.
The costs of quality.
Conformance costs.
Prevention costs.
Because preventing a problem is cheaper than finding and correcting it.
Appraisal costs.
Costs occur when nonconforming products or services are detected before delivery.
Costs arise when problems occur after delivery.
Note: It occurs because products or services are nonconforming or otherwise do not satisfy customers.
Internal failure costs and external failure costs.
Normal and abnormal spoilage?
Normal spoilage
- Occurs under normal, efficient operating conditions.
- Uncontrollable in the short run and, therefore, should be expressed as a function of good output (treated as a product).
- Rigorous approaches to quality to normal spoilage are minimal or even nonexistent.
- Assigned to all good units in process costing systems.
Abnormal spoilage
- Not expected to occur under normal, efficient operating conditions.
- It should be separately identified and reported.
- Typically treated as a period cost (a loss) because it is unusual.
At the time of production or at the time of sale.
Overhead control (debited).
Materials (credited).
Wages payable (credited).
Overhead applied (credited).
Work in process (debited).
Materials (credited).
Wages payable (credited).
Overhead applied (credited).
To a loss account.
II. Quality
It does not focus on improving the entire production process.
Do things right the first time.
Note: Errors should be caught and corrected at the source, and quality should be built in (designed in) from the start.
Designing the product to minimize defects.
Teams are a natural vehicle for sharing ideas, which leads to process improvement.
Focusing on the total quality of products and services.
Because the cumulative improvement from a company’s TQM efforts cannot readily be copied by competitors.
Teams of people from different specialties.
- Emphasis on continuous improvement.
- Responsiveness to the changing manufacturing environment.
- Improved customer satisfaction through product quality.
Ensuring goods and services conform to the design specifications.
Emphasizes satisfaction of customers, both internal and external.
Anyone external to the company and those internal who rely on its product to get their jobs done.
To tap the creative problem-solving potential of every employee.
- Lower costs.
- Better employer-employee relations.
- Greater employee commitment.
- External failure.
- Internal failure.
- Prevention.
- Appraisal.
- Scrap.
- Rework.
- Tooling changes.
- Downtime.
External failure costs.
- Warranty claims.
- Design engineering.
- Supplier evaluation.
- Percentage of defects.
- Returned merchandise.
- Allowances.
- Customer satisfaction.
- Perceived quality.
- Aesthetics.
- Performance.
- Features.
- Reliability.
- Durability.
- Serviceability.
- Fitness of use.
- Conformance.
Management by fact approach to continuous improvement.
Competitive benchmarking.
Quality deployment.
Costs in all categories of quality costs may be reduced while improving quality.
Note: Its goal is to seek the target value in every case or every unit produced.
III. Spoilages
Normal Spoilage
- Occurs under normal operating conditions.
- Uncontrollable in the short run.
- Treated as a product cost when operations are efficient.
Abnormal Spoilage
- It is not expected to occur under normal or efficient operating conditions.
- Treated as a loss when incurred, that is, as a period cost.
The support department’s expected costs of long-run capacity.
The costs are assigned to the good units passing through each inspection point.
At the end of the process.
Note: The cost attributed to normal spoilage should be assigned to the cost of goods manufactured (transferred out).
Same as spoilage.
Treated as a loss in the period of detection.
A quantity of production report.
IV. Scrap and Rework
Materials remaining from the production cycle but usable for purposes other than the original purpose.
Defective goods.
Credit a revenue account or credit manufacturing overhead control.
- If credit for a revenue account to record for scrap, the full costs associated with the scrap remain in work-in-process.
- If credit for an overhead control account to record for scrap, the amount realized indirectly reduces the costs of all units or directly reduces the cost of specific units.
Note: Regardless of the method used, good units continue to bear at least those costs associated with scrap that cannot be recovered by its sale.
If the scrap values are material and the scrap sales are regular or frequent (such as daily, weekly, etc.).