Managerial Accounting: An Introduction To Concepts, Methods, And Uses Chapter 4 Strategic Management of Costs, Quality, and Time Maher, Stickney and Weil

Learning Objectives (Slide 1 of 2)  Distinguish between the traditional view of quality and the quality-based view.  Define quality according to the customer.  Compare the costs of quality control to the costs of failing to control quality.  Explain why firms make trade-offs in quality control costs and failure costs.

Learning Objectives (Slide 2 of 2)  Describe the tools firms use to identify quality control problems.  Explain why just-in-time requires total quality management.  Explain why time is important in a competitive environment.  Explain how activity-based management can reduce customer response time.  Explain how traditional managerial accounting systems require modifications to support total quality management.

Explain Traditional Versus Quality-Based View

What is quality according to the customer?

List Some Examples of Performance Measures

Quality Control  Improving quality may be costly, but failing to improve quality may be equally costly  Costs of controlling and improving quality include what?

Prevention Costs What are some prevention costs?

Appraisal Costs  Costs to detect individual units of products that do not conform to specifications include:

Costs of Failing to Control & Improve Quality (Slide 1 of 2)  Internal failure costs - costs of detecting nonconforming products and services before delivery to customers  Scrap  Rework to correct defects  Reinspection/retesting after completing rework

Costs of Failing to Control & Improve Quality (Slide 2 of 2)  External failure costs - costs of detecting nonconforming products and services after delivery to customers  Warranty repairs  Product liability resulting from product failure  Marketing costs to improve tarnished company image  Lost sales from customer dissatisfaction

Identifying Quality Problems  Signals provided by these tools may be:  Warnings - indicate that something is wrong  Diagnostic- suggest cause of problem and possible solutions

Explain Control Charts

Discuss Pareto Charts

Review Cause-and-Effect Analysis

JIT and Total Quality Management  Just-In-Time philosophy requires high quality standards  System must immediately correct problems resulting in defective units  JIT helps prevent production problems from going undetected  Also requires a smooth production flow without downtime to correct problems

Importance of Time in a Competitive Environment  Competitive markets demand shorter new-product development and more rapid response to customers  Customer response time falls into two categories:  New-product development time  Operational measures of time

Comment on New-Product Development Time

What is break-even time?

What are operational measures of time?

Activity-Based Management to Improve Customer Response Time  ABM helps improve customer response time by identifying :  Activities that consume the most resources, both in dollars and time  Non-value-added activities

Describe Customer Response Time

Balanced Scorecard  Reports an integrated group of financial and nonfinancial performance measures, includes the following four areas  Financial  Internal business processes  Learning and Growth  Customer

Draw a Balanced Scorecard & Include Sample Measures

Review Total Quality Management

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