ACCT 361 Midterm Notes
ACCT 361
Chapter 19: Quality, Time and the Theory of Constraints (TOQ)
Quality on the production line (conformance to technical specifications) reduces costs and supports a cost leadership strategy
Quality may also differentiate one product from what might otherwise be a selection of substitutes and this way supports a value-leadership strategy
The term quality refers to a wide variety of factors – fitness for use, the degree to which a product satisfies the needs of a customer, or the degree to which a product conforms to design specification and engineering requirements
Quality of design – business functions of the value chain
Conformance quality – production process
Quality of design measures how closely the characteristics of products or services match the needs and wants of customers
E.g., if a customer wants a photocopier that combines faxing, scanning, and electronic printing, the photocopier machine must meet all of these needs or else it is a failure in quality of design
Conformance quality is the performance of a product or service according to design and performance specifications
E.g., photocopying machine breaks down = failure to satisfy conformance quality
Costs of quality (COQ) – costs incurred to prevent or rectify the production of low-quality product
Prevention costs – costs incurred to preclude the production of products that do not conform to specifications
E.g., design engineering, process engineering, preventative equipment maintenance, quality training, testing of new materials
Appraisal costs – costs incurred to detect which of the individual units of products do not conform to specifications
E.g., inspection, online production manufacturing and process inspection, product testing
Internal failure costs – costs incurred to detect a nonconforming product before it is shipped to customers
E.g., spoilage, rework, scrap, machine repairs, manufacturing/process engineering on internal failures
External failure costs – costs incurred to
Chapter 19: Quality, Time and the Theory of Constraints (TOQ)
Quality on the production line (conformance to technical specifications) reduces costs and supports a cost leadership strategy
Quality may also differentiate one product from what might otherwise be a selection of substitutes and this way supports a value-leadership strategy
The term quality refers to a wide variety of factors – fitness for use, the degree to which a product satisfies the needs of a customer, or the degree to which a product conforms to design specification and engineering requirements
Quality of design – business functions of the value chain
Conformance quality – production process
Quality of design measures how closely the characteristics of products or services match the needs and wants of customers
E.g., if a customer wants a photocopier that combines faxing, scanning, and electronic printing, the photocopier machine must meet all of these needs or else it is a failure in quality of design
Conformance quality is the performance of a product or service according to design and performance specifications
E.g., photocopying machine breaks down = failure to satisfy conformance quality
Costs of quality (COQ) – costs incurred to prevent or rectify the production of low-quality product
Prevention costs – costs incurred to preclude the production of products that do not conform to specifications
E.g., design engineering, process engineering, preventative equipment maintenance, quality training, testing of new materials
Appraisal costs – costs incurred to detect which of the individual units of products do not conform to specifications
E.g., inspection, online production manufacturing and process inspection, product testing
Internal failure costs – costs incurred to detect a nonconforming product before it is shipped to customers
E.g., spoilage, rework, scrap, machine repairs, manufacturing/process engineering on internal failures
External failure costs – costs incurred to