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Total Quality Management [3] February 22, 2009

Posted by desrinda in TQM.
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COST OF QUALITY (average = 5-25% of total sales turnover) consists of: COST OF CONTROL (prevention cost, appraisal cost) and COST OF FAILURE OF CONTROL (internal failure cost, external failure cost).

Prevention costs (P) are incurred to eliminate defective units before they are produced.

Appraisal costs (A) are incurred to eliminate defective units before they are shipped.

Internal failure (F) costs are incurred when a defect is discovered before being sent to the customer.

External failure (F) costs are incurred when a customer receives a defective product. 

A + F = 95% (average) of quality cost

As Initial study, cost data must be collected from:
1. Established accounts
2. Analysis of ingredients of established account
3. Basic accounting documents
4. Estimate: Temporary records, work sampling, allocation, atandard cost data, opinions of knowledgeable personnel

 costofquality

Graphs and charts:
1. Trend analysis
2. Pareto analysis (by element group, by department, by product, and other groupings)

Compare to:
– Per direct labor hours
– Per direct labor cost
– Per dollar of standard manufacturing cost
– Per dollar of sale
– Per equivalent unit of product

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