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Unformatted text preview: CHAPTER 4 STRATEGIC MANAGEMENT OF COSTS, QUALITY, AND TIME Questions, Exercises, and Problems: Answers and Solutions 4.1 See text or glossary at the end of the book. 4.2 The three factors that relate to meeting customer requirements are service, quality, and cost. 4.3 The quality-based view holds that quality must be established prior to inspections then there is no need to inspect defect-free goods. The traditional view is that product inspections are the only way to ensure quality. 4.4 The quality-based view holds that high quality leads to loyal, repeat customers, thus maximizing long-run profits. 4.5 The two costs of controlling quality are prevention costs and appraisal costs. 4.6 The two costs of failing to control quality are internal failure costs and external failure costs. 4.7 Service relates to the expectations the customer has about the product’s purchase and use. Organizations can develop a profile of the type of service that customers expect by asking them. 4.8 Answers will vary but should include reasons why the elements are not important. For instance, when purchasing an item that is easy for a consumer to observe, service might not be important. 4.9 In the short run, shareholders benefited because the company reduced its costs. Top management likely also benefited because their performance, as measured by the company’s financial performance, was better than if they had spent money on quality improvements. Customers who had the poor quality tires suffered in the short run. In the long run, the shareholders, top management and employees all suffered from the company’s poor reputation that came from the poor quality tires because the demand for the company’s products dropped. 4.10 Answers will vary. 4.11 Control charts can be used to identify whether fluctuations are random or reflect a systematic problem. There are countless examples. Consider the departure 4-1 Solutions time of a particular airline flight. The departure times will vary depending on the mechanical problems, delayed arrival of the aircraft, delays in baggage handling and so forth. A control chart could indicate whether these delays are significant enough to reschedule the “official” departure time to a later hour and minute. Consider the fluctuation in temperature of coffee that customers purchase at the local coffee shop. Suppose the coffee is supposed to be 140 degrees Fahrenheit. The control chart limits are 130 degrees to 150 degrees. If the coffee temperature is outside of that range, then the heating unit should be...
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This note was uploaded on 01/11/2012 for the course ACCT 202 taught by Professor Terru during the Spring '11 term at NYU.

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