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- 10 Marks
Question
Quality Management is a prerequisite for every industrial concern. Producing high-quality products as opposed to poor-quality products is a preferred option when it comes to determining demand for goods and services. However, some argue that producing higher-quality output increases costs, as more expensive resources are likely to be required to achieve a higher standard. Others argue that poor-quality output will lead to customer dissatisfaction, which generates costs associated with complaint resolution and loss of revenue as customers move to competitors.
Required:
In reference to the FOUR (4) types of quality cost, explain the costs associated with producing quality products. (10 marks)
Answer
- Prevention Costs:
These are costs incurred to prevent defects and ensure quality in products or services. Examples include the cost of building quality into product design, training staff in quality improvement, and the cost of preventive devices. - Appraisal/Inspection Costs:
These costs are associated with measuring, evaluating, or auditing products or services to ensure they meet quality standards. Examples include the cost of inspecting finished goods or services and supplier vetting. - Internal Failure Costs:
These are costs incurred when products fail to meet quality standards before they reach the customer. Examples include the cost of reworking faulty output and losses due to selling faulty output cheaply. - External Failure Costs:
These costs arise when defective products or services are delivered to customers. Examples include the cost of repairing returned products, customer service operations, and loss of customer goodwill.
(4 points @ 2.5 marks each = 10 marks)
- Tags: Cost Management, Operations Strategy, Production, Quality Management
- Level: Level 1
- Topic: Operations strategy
- Series: MAY 2019
- Uploader: Uploader1