Part 1 - Quality Management (1)

Question 1

Quality management

Answer 1

Involves planning and controlling activities to ensure the product or service is fit for purpose, meets design specifications and meets the needs of customers. Quality management should lead to improvements in performance.

Question 2

Quality­ related costs

Answer 2

• Monitoring the costs of quality is central to the operation of any quality improvement programme.
• KPIs should be developed based on the costs of quality and these can be used as a basis for staff
rewards.

Question 3

Quality­ related costs - Catagory

Answer 3

• Preventation costs: incur to prevent the production of products which do not conform to specification (design of the product and manufacturing process)
• Appraisal costs: costs to ensure that the products output by the manufacturer conform to standards
• Internal failure costs: arise when poor products are identified before despatch
• External failure costs: arise when poor products are identified after despatch

Question 4

Quality practices

Answer 4

Kaizen Costing
Target costing 
Total Quality Management
Just­in­time 
Six Sigma 
The 5S Concept
Lean Production

Question 5

What is Kaizen Costing

Answer 5

The philosophy of continuous improvement in performance by cost reduction via small, incremental steps.

Question 6

The need for continuous improvement - Kaizen Costing

Answer 6

The market price falls. Which means that in order to achieve the shareholders’ financial targets, the DIRECT COST of the Booster must FALL over the three years.

Continual incremental improvements using Kaizen costing, and measuring these improvements against targets from the previous period could help to achieve this.

Question 7

Ways to reduce waste using Kaizen costing

Answer 7

Traditional costing methods often see EMPLOYEES as the cause of high costs, whereas Kaizen costing sees the EMPLOYEES as a source of ideas on how to reduce costs

Pitlane must undergo a CULTURE CHANGE to encourage employees to suggest ideas, perhaps using quality circles, to reduce costs

Question 8

Characteristics of Kaizen Costing

Answer 8

• Kaizen involves setting STANDARDS and then CONTINUALLY improving these standards to achieve long-term sustainable improvements.
• The focus on ELIMINATING WASTE, improving processes and systems and improving productivity.
• Involves ALL AREAS of the business
• EMPLOYEES often work in terms and are empowered to make CHANGES.
• Allows the organization to RESPOND QUICKLY to changes in the competitive environment

Question 9

Steps of Kaizen Costing

Answer 9

• During the design phase, a TARGET COST is set for each production function
• The target costs are totaled to give a total target cost for the product. This becomes the baseline for the first year of production
• As the production process improves, cost reductions reduce the baseline cost.
• Cost reduction targets are set on a regular (e.g. monthly) basis and variance is carried out at the each period to compare the target cost reduction with the actual cost.