Chapter 17:
Implementing Quality
Concepts
Cost Accounting Principles, 9e
Raiborn ● Kinney
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accessible website, in whole or in part.
Learning Objectives
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What is quality, and from whose viewpoint should it be evaluated?
What is benchmarking, and why do companies engage in it?
What constitutes the total quality management philosophy?
How is the Baldrige Award related to quality?
What are the types of quality costs, and how are those types
related?
How is cost of quality measured?
How are a cost management system and the balanced scorecard
used to provide information on quality in an organization?
How is quality instilled as part of an organization’s culture?
(Appendix) What international quality standards exist?
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accessible website, in whole or in part.
Quality
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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
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accessible website, in whole or in part.
Quality Control
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Quality control—all attempts to reduce
variability and product defects
Six Sigma
 Statistical Process Control
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accessible website, in whole or in part.
Statistical Process Control
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Analyze where fluctuations occur in
processes
Use control charts
SPC charts require workers to respond when
there are
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Occurrences outside the control limits
Nonrandom patterns
Workers can prevent product defects and
process malfunctions
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accessible website, in whole or in part.
Characteristics of Product Quality
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Objective
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Performance
Features
Reliability
Conformance
Durability
Serviceability and
responsiveness
Subjective
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Aesthetics
Perceived value
Sloan Management Review
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accessible website, in whole or in part.
Characteristics of Service Quality
 All the characteristics of product quality
plus:
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Assurance
Tangibles
Empathy
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accessible website, in whole or in part.
Evaluating Quality
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Grade
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The quality level that a
product or service has
relative to the inclusion or
exclusion of characteristics
to satisfy customer needs,
especially price
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Value
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Meets the highest number of
needs at the lowest possible
cost (purchase price plus
operating, maintenance, and
disposal costs)
It’s too
expensive
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accessible website, in whole or in part.
Reasons to Benchmark (slide 1 of 2)
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Increase awareness of the competition
Understand competitors’ production and
performance methods as well as cost structures
Identify areas of competitors’ internal strengths
and weaknesses
Identify external and internal threats and
opportunities
Justify and accelerate a plan for continuous
process improvement and change
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accessible website, in whole or in part.
Reasons to Benchmark (slide 2 of 2)
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Create a framework for program and process
assessment and evaluation
Establish a focus for mission, goals, and
objectives
Establish performance improvement targets
Understand customers’ needs and expectations
Encourage creative thinking
Identify state-of-the-art business practices and
new technologies
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accessible website, in whole or in part.
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
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accessible website, in whole or in part.
TQM Tenets
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Dictate continuous improvement for an internal
managerial system (plan, control, make
decisions)
Require participation by everyone in the
organization
Focus on improving goods and services from
the customer’s point of view
Value long-term partnerships with suppliers
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accessible website, in whole or in part.
The Quality System
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Moves from after-the-fact inspection to proactive quality
assurance
Emphasizes
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planning for quality in every process and product
prevention
zero defects and continuous improvement
Results
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ability to set goals and methods for quality improvements
system for measuring quality and providing feedback on quality
enhancements
encouragement of teamwork
change from product inspection and defect correction to proactive
quality assurance
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accessible website, in whole or in part.
Malcolm Baldrige
National Quality Award
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Focuses on
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Management systems
Processes
Consumer satisfaction
Business results
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Types of entrants
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Business and notfor-profit
Education
Health care
Represents Excellence
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accessible website, in whole or in part.
Types of Quality Costs
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Cost of Compliance
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Preventive costs—prevent product defects
Appraisal costs—monitor and compensate when
prevention fails
Cost of Noncompliance
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Failure costs
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Internal losses—scrap, rework
External losses—warranty work, customer complaint
departments, litigation, product recalls
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accessible website, in whole or in part.
Calculating the Total Quality Cost
Total
Quality
Cost
=
Prevention
Appraisal
Failure
+
+
Cost
Cost
Cost
T=K+A+F
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accessible website, in whole or in part.
Organizational Culture of Quality
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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
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accessible website, in whole or in part.
Questions
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What is quality?
How is benchmarking used to improve
quality?
What are the different measures of the
cost of quality?
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accessible website, in whole or in part.
Potential Ethical Issues
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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
Discriminating against minority supplies
Choosing to ignore internal information about defects and
failures
Minimizing estimates of internal and external failure costs
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
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.