Week 5- Quality and the cost of quality

Question 1

Is quality solely a tangiable measure eg. quality of the product produced

Answer 1

No quality can be measured intangible as well eg. the customer service you offer before and after the sale

Question 2

who is the organisation that ensures that manufacturers have a well-defined quality control system in place?

Answer 2

The international standards organisation

Question 3

what factors influence the quality of a product?

Answer 3

1) Grade: the promise made by the product to perform in the intended way
2) Design: how well the design meets the specificaations
3) Conformance: How eel it conforms to the design specifications

Question 4

what should quality measures do?

Answer 4

• Indicate customers evaluations of product and service quality
• Estimate customers satisfaction with services received eg. through focus groups or surveys
• Provide warning signals about any deterioration in product or service quality. Should warm the company before the company loses market share and customers

Question 5

what does variation in the number of defects in the product indicate?

Answer 5

Poor quality

Question 6

what re lead indicators?

Answer 6

Tools that measure the variation in number of product defects

Question 7

what are the three lead indicators?

Answer 7

Histograms
Run charts
Control charts

Question 8

what do diagnostic tools show us?

Answer 8

help us to determine wy their is so much variance in the number of product defects

Question 9

what are the four diagnostic tools that can be used to calculate quality problems?

Answer 9

Cause and effect diagrams
scatter diagrams
flowcharts
pareto charts

Question 10

why is maintaining quality important?

Answer 10

Important for:

• Customer satisfaction
• Reputation
• Profit
• retaining customers

Question 11

what are the two costs associated with maintaining quality?

Answer 11

1) costs of corrective measures taken because of a failure to control quality
2) costs of activities designed to control the quality

Question 12

what are the type types of quality cost?

Answer 12

Observable and hidden

Question 13

what are the different costs of controlling quality?

Answer 13

prevention costs: cost of preventing defects

Appraisal costs: costs of determining whether defect exist

Question 14

what is the cost of internal failure?

Answer 14

Costs associated with defects in processes and products that are found PRIOR to delivery to customers

Question 15

what is the cost of external failure?

Answer 15

Costs associated with defects in processes and products that are found AFTER delivery to customers

Question 16

what is the traditional view on improving quality?

Answer 16

Return on quality

Question 17

what is return on quality?

Answer 17

states that there is an optimal quality that id lower tahn the highest possible product quality. This is because it believes that customers prefer to pay a little less but still get good quality but not perfect quality. The view believes that this is where profit is maximised

Question 18

what is the contemporary view on improving quality?

Answer 18

Total quality management

Question 19

what is total quality management?

Answer 19

States that a company should strive to offer the highest product quality. this is because the view believes that improving quality constantly reduces cost and improves profitability

Question 20

what is sustainable development?

Answer 20

the cost of maintaining that business activity does not limit the ability of future generations to meet their needs

Question 21

what is environmental cost?

Answer 21

cost of cleaning up environmental issues eg. oilspill

Question 22

what is environmental cost management?

Answer 22

identifiying and reducing environmental costs

Question 23

what are the four types of environmental cost?

Answer 23

private environment costs: borne by a company or individual

social environmental costs: borne by the public

Visisble environmental costs: those that are known and clearly identified as tied to environmental issues

hidden social environmental costs: not clearly tied to environmental issues

Question 24

how can visible and hidden environmental costs be further classified into three categories?

Answer 24

• montioring costs: cost of monitoring whether pollution is occuring in the production process
• Abatement costs: costs to reduce pollution

Remeditation costs

Question 25

what are the factors that influence pricing decisions?

Answer 25

1) customer demand
2) political, legal and image issues
3) competitors
4) costs

Question 26

what is the best approach to pricing decisions?

Answer 26

inbetween Optimal pricing decisions and suboptimal decisions

Question 27

why is a mix of optimal and suboptimal pricing decisions the best?

Answer 27

optimal decisons are more sophisticated but more costly than suboptimal decisions

Question 28

what is activity-based pricing?

Answer 28

Activity based costing applied to pricing strategy. Assigns the price to the activities involved in the production of the product. Optimises profit

Question 29

does activity based pricing integrate price elasticity of demand?

Answer 29

yes

Question 30

what is market skimming?

Answer 30

Charging a premium price on product that have a USP

Question 31

what is market pentration?

Answer 31

Setting a low price to gain customers quickly

Question 32

what is complementary pricing?

Answer 32

Setting the price high for products that complement other products eg. printer cartridges may be sold for a higher price because the company knows that a customer will return to byt them once buying a printer

Question 33

what is market segmentation?

Answer 33

targeting differing segements of the market with different products and charging different prices.