Tutorial 12 & 13
Solutions
Q1
(1)
(2)
(3)
(4)
(5)
Elimination of non-value added activities
Factory layout
Batch sizes of one
Jit purchasing arrangements
Jit and management accounting
Some of the financial benefits are costs saved in the elimination of non-value added
activities, zero inventories and thus reduced stock holding costs, zero defects
resulting in savings in rejects and reworks.
Q2
a)
For and explanation of TQM you should refer to the ‘Cost of quality’
in Chapter 22. The answer should draw attention to the need to introduce a
TQM training programme and a study of the production process to ensure
that methods are in place to minimize defects and avoid scrap and rework. A
right first time policy should be implemented. A daily quality reporting
system should also be introduced that reports defects, rework and returns
from customers. Consideration should also be given to introducing statistical
quality control procedures. In addition, a six-monthly or annual cost of
quality reporting system should be introduced.
b) A Jit philosophy aims to eliminate waste and this is enhanced by the
adoption of TQM. With the pull system that accompanies a JIT
philosophy, defects bring the whole production process to a halt so a
‘right firswt time’ policy supports JIT PRODUCTION. Furthermore, the
absence of stocks that is a feature of JIT means that safeguards do not
exist to cope with defects, rework and returns from customers, The
effects of poor quality result in costly production stoppages and a danger
that customer commitments will not be met. TQM is therefore and
inherent feature of JIT production.
c) The four quality cost classifications are: prevention costs, appraisal costs,
internal failure costs and external failure costs. Examples include
preventive maintenance of food processing machinery (prevention cost0,
inspection of the output (appraisal cost), scrapping of foods because of
inferior quality (external failure cost) and the cost of replacing faulty
output delivered to customers and any lost profits on future sales arising
from customer dissatisfaction (external failure cost).
Q3
a) It integrates both financial and non-financial measures and incorporate
performance measurement within the strategic management process. Identifying key
performance measures that link measurements to strategy led to the emergence of
the balanced scorecard which is an integratd set of performance measures derived
from the company’s strategy that gives top management a fast but comprehensive
view of the organizational unit.
The four perspectives are the customer perspective, the internal business perspective,
the learning and growth perspective and the financial perspective.
b) It clarifies and translates vision and strategy into specific strategic objectives and
identifying the critical drivers of the str5ategic objectives It communicates and
links strategic objectives and measures.. It plans, set targets and aligns strategic
initiatives. It enhances strategic feedback and learning so that managers can
monitor and adjust the implementation of their strategy, and, if necessary, make
fundamental changes to the strategy itself.
c) See Chapter 23 pg 1003 to 1004 for a detailed explanation.
Q4
Mention of the four types of costs should be made – prevention costs, appraisal
costs, internal failure costs and external failure costs.
ABC produces more accurate product or service costs. For more details see chapter
22 pg. 951-953.
Explanations are given chapter 22, pg 999-1003.