QUALITY COST MEASUREMENT UNDER ACTIVITY-BASED COSTING NAME : FARAH NABILA BINTI AZMI MATRIC NO : A LECTURER : PUAN AINUN BINTI HAJI ABD MAJID

APPROACHES TO MEASURING COQ

PAF APPROACH PAF Prevention Cost - associated with the design, implementation and maintenance of the total quality management system. Appraisal Cost - associated with the supplier’s and customer’s evaluation of purchased materials, processes, intermediates, products and services to assure conformance with the specified requirements. Failure Cost -internal : occur when the results of work fail to reach designed quality standards and are detected before transfer to customer takes place. -external : occur when products or services fail to reach design quality standards but are not detected until after transfer to the customer.

PROCESS COST APPROACH Cost of Conformance (COC) - actual process cost of providing products or services to the required standards, first time and every time, by a given specified process Cost of Nonconformance (CONC) - the failure cost associated with a process not being operated to the required standard Cost of Quality

QUALITY COST COLLECTION 1. Identify the quality cost elements 2. Quantify the elements and put costs

TWO-DIMENSIONAL MODEL OF ABC Cost assignment view of ABC resource costs are assigned to activities by using resource drivers activity cost pool is distributed to cost objects by using an activity driver Process view of ABC Cost driversActivities Performance measures

COQ APPROACH vs ABC activity-oriented regards COQ-related (or PAF-related) activities as improvement objects PAF approach of COQ process-oriented regard processes/activities as improvement objects Process cost approach activity-oriented for the cost assignment view and process-oriented for the process view regard processes/activities as improvement objects ABC

COQ MEASUREMENT UNDER ABC (1 st STAGE) activities of the ABC model would be COQ-related activities (prevention, appraisal, internal failure, and external failure) and COQ-unrelated activities. total COQ, four COQ components, and the costs of detailed COQ- related activities can be achieved from the first stage of ABC cost assignment view PAF approach activities of the ABC model would be the flowcharted activities of various processes, including COC-related and CONC-related activities results achieved in the first stage of ABC cost assignment view would be the costs of flowcharted activities, total process costs, COC, and CONC of various processes Process cost approach

COQ MEASUREMENT UNDER ABC (2ND STAGE) need to know the COQ information by departments or products regard departments or products as cost objects and trace the various COQ- related activity costs to departments or products by using appropriate activity drivers in the second stage of ABC cost assignment view PAF approach trace the cost of CONC- related activities to their sources achieved by using appropriate activity drivers in the second stage of ABC cost assignment view Process cost approach

Uses of coq information to identify the magnitude of the quality improvement opportunities to identify where the quality improvement opportunities exist to plan the quality improvement programs to control quality costs.

conclusion While there are a few deficiencies of most COQ systems in measuring COQ, these deficiencies can be easily overcome under ABC together with work sampling. This paper proposes an integrated COQ-ABC framework based on the similarities of COQ approaches and ABC. The long-term goal of the integrated COQ-ABC system is to eliminate non-value-added activities, which are related to appraisal and failure costs for the PAF approach and CONC and some COC for the process cost approach, and to streamline value-added activities/processes.