1. Implementing Quality Concepts
Cost Accounting
Foundations and Evolutions
Kinney and Raiborn
Seventh Edition
Chapter 17
Implementing Quality Concepts
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2. Learning Objectives (1 of 3)
Define quality and explain from whose viewpoint quality should be evaluated
Define benchmarking and explain why companies use benchmarking
Explain total quality management as a management philosophy

3. Learning Objectives (2 of 3)
Describe how the Baldrige Award is related to quality
Describe the types of quality costs and explain how these costs are related
Explain how the cost of quality is measured

4. Learning Objectives (3 of 3)
Describe how a balanced scorecard and cost management system provide information on quality in an organization
Explain how quality can become a part of an organization’s culture
Identify the international quality standards

5. Quality
The sum of all of the characteristics of a product or service that influence its ability to meet the stated or implied needs of the person acquiring it
Totality of internal processes that generate a product or service
Customer satisfaction with that product or service

6. Improving Quality Increase good output from a specific amount of input
Reduce variability, often by automating the process
Reduce the failure rate
Conform to customer requirements

7. Quality Control
Quality control – all attempts to reduce variability and product defects
Six Sigma
Statistical Process Control

8. Characteristics of Product Quality
Objective
Performance
Features
Reliability
Conformance
Durability
Serviceability and responsiveness
Subjective
Aesthetics
Perceived value
Sloan Management Review

9. Statistical Process Control
Analyze where fluctuations occur in processes
Use control charts
SPC charts require workers to respond when there are
occurrences outside the control limits
nonrandom patterns
Workers can prevent product defects and process malfunctions

10. Characteristics of Service Quality
All the characteristics of
product quality plus
Assurance
Tangibles
Empathy

11. Evaluating Quality Grade
One of the many quality levels that a product or service has relative to the inclusion or exclusion of characteristics to satisfy customers needs, especially price
Value
Meet the highest number of needs at the lowest possible cost (purchase price plus operating, maintenance, and disposal costs)
It’s too
expensive

12. Reasons to Benchmark Increase awareness of the competition
Understand competitors’ production and performance methods
Identify areas of competitors’ internal strengths and weaknesses
Identify external and internal threats and opportunities

13. Reasons to Benchmark
Justify a suggested plan for continuous process improvement and change
Create a framework for program and process assessment and evaluation
Establish a focus for mission, goals, and objectives
Establish performance improvement targets

14. Total Quality Management (TQM)
Management approach of an organization, centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to society

15. Benefits of TQM
Insert Exhibit 17-7

16. Strategic Cost Management
Use management accounting information to
set and communicate organizational strategies
establish, implement, and monitor the methods to accomplish the strategies
assess the achievement of strategies
Includes reporting information on
quality goals and objectives

17. Organizational Culture of Quality
Committed and consistent top leadership
Employees who are eager to meet and exceed customer expectations
Work environment that cares about employees and rewards efforts to achieve high quality
Empowered employees
Job and quality training
Pursuit of quality awards

18. Questions What is quality?
How is benchmarking used to improve quality?
What are the different measures of the cost of quality?

19. Potential Ethical Issues
Ignoring acceptable variation limits and therefore accepting defect levels that are excessive
Using lower grade raw material and components than specified
Using benchmarking to illegally gain information from competitors

20. Potential Ethical Issues
Discriminating against minority supplies
Choosing to ignore internal information about defects and failures
Minimizing estimates of internal and external failure costs

21. Potential Ethical Issues
Not supporting total quality management initiatives in company practices
Selling products at low prices and attempting to recover revenue with exorbitant repair charges after warranty time period