1. Chapter 18 New Developments

2. Quality more important than ever! s ISO 9000 s TQM philosophy –Strives for 100% quality - no defects

3. Costs of quality: s External failure costs - occur after product leaves the company. s Appraisal costs - are incurred to “catch” quality mistakes before products leaves company. s Prevention costs - incurred to prevent defects from ever happening. s Internal failure costs - includes rework time on defective products & factory down time.

4. JIT - a way to s Reduce costs by eliminating or minimizing inventories. s Streamline plant operations. s Increase quality.

5. JIT - some points: s Uses a pull rather than push system. s Often use flexible manufacturing systems or manufacturing cells. s Try to reduce product defects.

6. ABC s Delivers better cost of product info than a traditional system, partly because “old” OH allocation bases (such as DLHs) are no longer valid with today’s modernized manufacturing systems.

7. Some points - ABC s Can use with job order or product costing. s Point is to determine what drives OH & then allocate OH according to that activity. s Provides a more “precise” allocation of OH - but, it’s more expensive to implement! s Uses a three-stage allocation process.

8. Three - Stage Process: s 1. Allocate OH to activity pools. (machine set-up, materials receiving, shipping, quality control.) s 2. Assign OH from activity pools to jobs or processes. s 3. Assign OH from jobs or processes to individual units of product.

9. The End