MyChapter_14 - CHAPTER 14 QUALITY COST MANAGEMENT QUESTIONS...

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CHAPTER 14 QUALITY COST MANAGEMENT QUESTIONS FOR WRITING AND DISCUSSION 1. Quality of design is a function of the pro- duct’s specifications, whereas quality of con- formance is a measure of how a product meets its specifications. 2. All quality costs are incurred because poor quality may or does exist. 3. The zero-defects approach emphasizes conforming to specifications. Upper and lower limits are set for product variation, and any unit that falls within those limits is deemed acceptable (units outside the range are defined as defective). The robust quality approach emphasizes “fitness for use.” There is no range within which variation is acceptable. Thus, any unit not meeting the target is defective. 4. Under the robust quality approach, any vari- ation from the ideal entails a loss, a loss which grows larger as the variation in- creases. This approach leads to the Taguchi quality loss function, which is based on the idea that any variability from the ideal causes hidden quality losses or costs. The Taguchi quality loss function shows that costs increase at an increasing rate as vari- ability increases. This function is symmetric. 5. Prevention costs are incurred to prevent de- fects in products; appraisal costs are costs incurred to determine whether products are conforming to specifications; internal failure costs are incurred when nonconforming products are detected prior to shipment; ex- ternal failure costs are incurred because nonconforming products are delivered to customers. 6. External failure costs can be more devastat- ing because of warranty costs, lawsuits, and damage to the reputation of a company, all of which may greatly exceed the costs of re- work or scrap incurred from internal failure costs. 7. Agree. It is poor quality, not good quality, that is costly. All quality costs exist because poor quality may or does exist. 8. Interim quality standards are used to mea- sure a firm’s progress toward better quality within a given period. 9. Interim quality reports are used to measure quality improvement with respect to a current-period standard; multiple-period reports are used to measure quality im- provement with respect to a base period; long-range reports are used to measure pro- gress toward achieving the goal of zero de- fects. 10. Both monetary and nonmonetary incentives can be used. For example, employees can be given a bonus that is equal to a fixed per- centage of the savings from a suggestion that improved a product’s quality (referred to as gainsharing). Additionally, awards of ex- cellence can be used to recognize those employees who make outstanding quality contributions. 11. Firms should spend about 2.5% of sales on quality costs. The potential savings from quality improvement is $31 million [$36 mil- lion (0.18 × $200 million) – $5 million (0.025 × $200 million)]. 12.
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MyChapter_14 - CHAPTER 14 QUALITY COST MANAGEMENT QUESTIONS...

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