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12 - ACCT3012 Management Accounting B Product Service...

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1 ACCT3012: Management Accounting B Quality and Just-in-Time
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1. Readings Horngren, Datar, Foster, Rajan and Ittner , Cost Accounting: A Managerial Emphasis, 13 th Edition, Chapters 19 and 20 (Extracts) 2
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3 2. Learning Objectives explain the relationship between the cost-of-quality concept and other key quality concepts; define the four cost-of-quality categories; describe the nature and broad categories of quality costs; outline the philosophy and characteristics of just-in-time principles; explain the benefits and limitations of JIT; define target costing and describe the process of target costing in the context of cost-management and cost- reduction programs; and calculate target costs.
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4 3. Outline Why quality? What is quality? Types of quality Costs of quality All about balance TQM JIT Target costing
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4. The Need for Quality Globalised markets gave consumers considerably more choices Increasing demand for quality products/services Denning and Juran – need to ‘design in’ rather than ‘inspect in’ quality 1970s-80s ‘Quality’ race – ‘Made in U.S.’ VS ‘Made in Japan’ 5
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4. (cont’d) Quality and profitability are related ↑ Quality = ↑ Efficiency, ↓ Costs, ↑ Customer response Businesses offering quality products/services more likely to capture larger market shares 6
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7 5. Defining Quality A quality product/service is one that: Conforms with design specifications; Meets customers’ needs and requirements; and Is priced competitively
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6. Types of Quality Design Quality: ‘does the product/service satisfy the needs of the customer?’ Fuel-efficient car, House with built-in garage Conformance Quality: ‘does the product/service satisfy its specifications?’ Car break-downs, Faulty drainage pipes 8
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6.1 Quality and the MAS Concerned with identifying, measuring and controlling the costs of quality: ‘What needs to be done to ensure quality throughout?’; ‘What needs to be done to correct quality break-downs?’ 9
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6.2 Costs of Quality Costs of design quality – opportunity cost of forgone sales (but difficult to measure) Costs of conformance quality – four
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12 - ACCT3012 Management Accounting B Product Service...

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