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Article
Publication date: 22 April 1991

Heidi Hylton Meier

Measuring quality costs is becoming an increasingly more important task for accountants. This is especially true in light of new definitions and goals of quality programs…

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329

Abstract

Measuring quality costs is becoming an increasingly more important task for accountants. This is especially true in light of new definitions and goals of quality programs, which are primarily to produce goods and services with zero defects while preventing problems, improving reliablity and eliminating waste. This article examines how accountants can provide cost information using the traditional quality cost model along with expected value techniques so that managers may make more effective decisions to accomplish these goals.

Details

American Journal of Business, vol. 6 no. 1
Type: Research Article
ISSN: 1935-5181

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Article
Publication date: 1 May 1991

Barrie Dale

A summary, in bullet‐point format, of the main issues and queries that need to be addressed in the development of quality costing, based on research work carried out at…

Abstract

A summary, in bullet‐point format, of the main issues and queries that need to be addressed in the development of quality costing, based on research work carried out at the University of Manchester Institute of Science & Technology over the previous nine years. Examines the role of quality costing in TQM and the importance of definitions to the collection, analysis and use of quality costs, arguing that without clear definitions, there can be no common understanding or meaningful communication on the subject. Suggests quality costing strategies to collect the data. Looks at the issues involved in reporting quality costs, their use and the relationship of quality costing to accountancy.

Details

The TQM Magazine, vol. 3 no. 5
Type: Research Article
ISSN: 0954-478X

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Article
Publication date: 1 September 2006

Andrea Schiffauerova and Vince Thomson

The objective of this paper is to present results of the study of the quality costing practices at four large successful multinational companies.

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4241

Abstract

Purpose

The objective of this paper is to present results of the study of the quality costing practices at four large successful multinational companies.

Design/methodology/approach

The method of benchmarking was used for the purpose of this study. Company representatives, who were invited for a benchmarking session, described the quality management programs running at their companies. Direct observation and archival records data collection were also used to extract more precise information for the following analysis and discussion.

Findings

The findings of the study show that all four companies use systematic quality initiatives; however, a formal cost of quality (CoQ) methodology was only employed at one of them. This is in agreement with the literature findings arguing that a CoQ approach is not utilized in most quality management programs.

Originality/value

This paper discusses and compares the quality programs of four companies and explains the benefits of the eventual adoption of a CoQ approach in each case. The analysis provides a new insight into company practice, useful both for academic research and industry.

Details

The TQM Magazine, vol. 18 no. 5
Type: Research Article
ISSN: 0954-478X

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Article
Publication date: 23 August 2011

Arvind Chopra and Dixit Garg

The purpose of this paper is to find out the behavior patterns of different quality cost categories to enable us to take the right decisions in allocating resources for…

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2883

Abstract

Purpose

The purpose of this paper is to find out the behavior patterns of different quality cost categories to enable us to take the right decisions in allocating resources for reducing quality costs.

Design/methodology/approach

Costs of quality, existing in a small‐scale industry in India, in the financial year 2006‐2007, were found out. At the start of the financial year 2007‐2008 a quality cost program was implemented in that organization and more resources were allocated for prevention and appraisal cost activities. Subsequently, the costs of quality related to the financial year 2007‐2008 and 2008‐2009 were found out. Based on the quality cost data of three years, co‐relation co‐efficient between the different quality cost categories were calculated.

Findings

The co‐relation co‐efficient between different quality cost categories suggest that by increasing the efforts towards prevention and appraisal activities, costs of non conformance decrease. Furthermore, there exists positive co‐relation within costs of conformance and between costs of non conformance.

Orginality/value

In the competitive modern world, small scale organizations have limited resources. They do not have funds to hire consultants. So, the behaviour patterns of quality cost categories help these organizations to allocate precious resources more effectively and result in the reduction of quality costs thereby improving profitability.

Details

The TQM Journal, vol. 23 no. 5
Type: Research Article
ISSN: 1754-2731

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Article
Publication date: 1 October 1998

Rune M. Moen

Measuring quality costs has been emphasized as an important part of quality improvement since the early 1950s. A chapter on quality costs seems to be almost compulsory in…

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3121

Abstract

Measuring quality costs has been emphasized as an important part of quality improvement since the early 1950s. A chapter on quality costs seems to be almost compulsory in every book pertaining to total quality management, business process improvement, and similar topics. There is no doubt that measuring quality costs is useful in order to direct improvement efforts; the problem is that the concept is not as valid today as it used to be. While customer requirements and production systems have changed considerably during the last decades, quality cost measurement is advocated in nearly the same way as it was 40 years ago. This work presents a new customer and process focused poor quality cost model that enables the provider of a product or service to focus on elements that really matter to his customers. The input to the model is customer requirements and the output is expected poor quality costs estimated through the Taguchi loss function. Quality function deployment is used to translate the voice of the customer to key process parameters, that is process parameters having a direct influence on the fulfilment of customer requirements. The quality function deployment matrix is also used to estimate intangible costs. Traditional cost categories have been altered, and the expected loss for each cost category is estimated based on actual process performance and stepwise quadratic loss functions with multiple intervals. The intended use of the model is as a top management decision‐making tool able to link quality improvement to customer satisfaction and loyalty.

Details

The TQM Magazine, vol. 10 no. 5
Type: Research Article
ISSN: 0954-478X

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Article
Publication date: 1 August 1994

Geanie W. Margavio, Ross L. Fink and Thomas M. Margavio

Quality improvement decisions are the catalyst for substantialtechnological improvements being made in the manufacturing sector. Thenew technology, however, has developed…

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2355

Abstract

Quality improvement decisions are the catalyst for substantial technological improvements being made in the manufacturing sector. The new technology, however, has developed faster than techniques for evaluating capital investments in such improvements. This is largely because the benefits of quality improvement technology are difficult to quantify. The Taguchi loss function is incorporated into a net present value capital budgeting technique to provide an estimate of these benefits. Describes the loss function in relation to key quality costs: appraisal and prevention costs, and internal and external failure costs. External failure cost savings are generated by reducing variability in the manufacturing process. These savings are then compared with the cost of the quality improving technology. Results indicate that these savings can be substantial, depending on the achieved reduction in the process variability, the cost of capital, and on the estimate of the cost of processing a customer’s return of the product.

Details

International Journal of Quality & Reliability Management, vol. 11 no. 6
Type: Research Article
ISSN: 0265-671X

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Article
Publication date: 1 December 2001

Claude R. Superville and Sanjay Gupta

There is consensus that money invested in quality programs provides a high rate of return, but disagreement on how the optimal level of quality investment can be modeled…

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2359

Abstract

There is consensus that money invested in quality programs provides a high rate of return, but disagreement on how the optimal level of quality investment can be modeled. It has been postulated that there is no correct cost of quality (COQ) model since quality costs are dynamic and firm specific. Firms tend to move to new quality levels over time as they increase their prevention activities aimed at detecting and eliminating cause of variation. Many firms tend to misallocate quality spending by investing the greatest percentage of quality costs to the lowest yielding categories and the lowest percentage of quality costs to the highest yielding categories. Examines the various COQ models that have been proposed and explains the misallocation of quality investment by firms. Describes why quality initiatives undertaken by a firm are generally consistent with corporate goals and strategy, the maturity level of a firm, and management commitment.

Details

The TQM Magazine, vol. 13 no. 6
Type: Research Article
ISSN: 0954-478X

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Article
Publication date: 1 March 1990

L. Brennan, H. Cullinane, C. O′Connor, D. Punch and J. Sheil

The determination of quality costs on a production line is discussed. An approach to quality costs analysis is developed and illustrated employing a particular production…

Abstract

The determination of quality costs on a production line is discussed. An approach to quality costs analysis is developed and illustrated employing a particular production line. This line which is devoted to the assembly and testing of an advanced computer system is fully described. A diagrammatic model of the production line is presented which displays points on the line at which quality costs can arise and the nature of these costs. A quality cost model for this line incorporating prevention, appraisal and failure cost elements is presented and their estimation discussed. It is argued that the modelling concept developed can provide a general framework for the isolation of quality costs.

Details

International Journal of Quality & Reliability Management, vol. 7 no. 3
Type: Research Article
ISSN: 0265-671X

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Article
Publication date: 1 April 2004

Vincent K. Omachonu, Sakesun Suthummanon and Norman G. Einspruch

This paper examines the components of quality cost (internal failure, external failure, appraisal cost, and prevention cost) in the context of two key manufacturing…

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6872

Abstract

This paper examines the components of quality cost (internal failure, external failure, appraisal cost, and prevention cost) in the context of two key manufacturing inputs, materials and machines; the concept is also explained for the company as a whole. The purpose of this research is to analyze the variables that impact quality in a manufacturing environment. There are three major findings in this research. First, there is an inverse relationship between appraisal cost plus prevention cost and failure cost. Second, the relationship between appraisal cost plus prevention cost and quality is positive. Finally, failure cost is negatively correlated with quality. This analysis also revealed a strong relationship between appraisal cost plus prevention cost and quality for material input, machine input, and the company. The results indicate that as the appraisal cost plus the prevention cost increases, quality improves and failure cost decreases.

Details

International Journal of Quality & Reliability Management, vol. 21 no. 3
Type: Research Article
ISSN: 0265-671X

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Article
Publication date: 28 September 2012

Arvind Chopra and Dixit Garg

The purpose of this paper is to develop two models in the field of cost of quality. One model would be for estimating/calculating cost of quality and the second model…

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2742

Abstract

Purpose

The purpose of this paper is to develop two models in the field of cost of quality. One model would be for estimating/calculating cost of quality and the second model would be for implementing cost of quality system in an industry.

Design/methodology/approach

Although most industries are aware of the benefits of cost of quality, only a few of them are using it in their organization because they do not know how to calculate and implement same. Hence, to help those industries, simple models are proposed for calculating cost of quality and for implementing cost of quality system.

Findings

Cost of quality models are developed and later on they are validated through a case study. It is observed that by implementing same, the cost of quality reduced significantly in the chosen industry.

Originality/value

Average industries do not have resources to hire the services of consultants to implement cost of quality systems in their industries, therefore the simple models proposed in the paper will be of great value to them.

Details

The TQM Journal, vol. 24 no. 6
Type: Research Article
ISSN: 1754-2731

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