Management Accounting Ch09_Stu.ppt

* * Non-financial Performance Measures Learning Objective 6 Quality Circle time Productivity Quality Control Quality control is the effort to ensure that products and services perform to customer requirements. Cost of Quality Report Prevention Internal failure Appraisal External failure Cost of quality report displays the financial impact of quality Cost of Quality Report Prevention costs are the costs incurred to prevent the production of defective products or delivery of substandard services. Appraisal costs are the costs incurred to identify defective products or services. Cost of Quality Report Internal failure costs are the costs of defective components and final products or services that are scrapped or reworked. External failure costs are the costs caused by delivery of defective products or services to customers, such as field repairs, returns, and warranty expenses. TQM Total quality management (TQM) focuses on prevention of defects and on achievement of customer satisfaction. The TQM approach assumes an organization minimizes the cost of quality when it achieves high quality levels. TQM is the application of quality principles to all the organization’s efforts to satisfy customers. Quality-Control Chart The quality-control chart is a statistical plot of measures of various product dimensions or attributes. This plot helps detect process deviations before the process generates defects. Quality-Control Chart 0 1 2 3 3/12 3/19 3/26 4/2 4/9 4/16 4/23 4/30 5/7 5/14 Week of Percentage of Defects Goal = 0.6% Actual Six Sigma It is a continuous process improvement effort designed to reduce costs by improving quality. It has broadened into a general process to define and measure a process, analyze it, and improve it to minimize errors. Control of Cycle Time Cycle time, or throughput time, is the time taken to complete a product or service, or any of the components of a product or service. The longer a product or service is in process, the more cos