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1Quality, Time, and theQuality, Time, and theTheory of ConstraintsTheory of ConstraintsChapter 19
2QualityThe total features and characteristics of a product or service, made or performed according to specifications, to satisfy customers at the time of purchase and during use
3Quality•Improves customer satisfaction•Reduces costs•Shorter delivery times•Shorter development times•Reduced inventory levels
4Quality•Scorecards play a major role in good quality programs, used to measure quality, time and increased throughput, in order to satisfy customers, and to gain a competitive advantage
5Cost of QualityCosts incurred to prevent, or the costs arising, as a result of producing a low quality product or service
6Two Aspects of QualityTwo Aspects of QualityActualPerformanceDesignSpecificationsCustomerSatisfactionQuality ofDesignFailureConformanceQualityFailureHow well productsmeet customer needsPerformance of product or servicerelative to its designspecifications
7The four cost categoriesin a cost-of-quality program.
8Costs of QualityCosts of QualityPrevention costsCosts incurred to precludemanufacturing of products thatdo not meet specificationsAppraisal costsCosts to detect which products do not meet specificationsInternal failure costsCosts incurred ondefective products beforeshipped to customerExternal failure costsCosts incurred onDefective products aftershipped to customer
10Activity Based Approach to Activity Based Approach to Determining the Cost of QualityDetermining the Cost of Quality1.Identify product (s)2.Identify the direct costs of quality of the product (s)3.Select the cost-allocation bases to use for the allocating of indirect costs of quality to the products4.Identify the indirect costs of quality associated with each cost-allocation base5.Compute the rate per unit6.Compute the indirect costs of quality allocated to the product7.Compute the total costs of quality of the product
11Costs of Quality ExampleCosts of Quality ExampleVegas Photo Corporation made 10,000photocopying machines last year.Vegas Photo determines the costs of qualityof its photocopying machines using a 7-stepactivity-based costing approach.
12Costs of Quality (Steps 1 and 2)Costs of Quality (Steps 1 and 2)Identify cost objects.10,000 photocopyingmachinesIdentify the direct costsof quality of the products.