Textbook Notes (363,314)
Canada (158,331)
MGAC03H3 (13)
G.Quan Fun (10)
Chapter 19

Chapter 19 Notes

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University of Toronto Scarborough
Financial Accounting
G.Quan Fun

Chapter 19 Cost Management Quality Time and the Theory of Constraints NotesQuality as a Competitive ToolThe BSCFour Perspectives to Measure the Costs of Qualitythe term quality refers to a wide variety of factorsfitness for use the degree to which a product satisfies the needs of a customer and the degree to which a product conforms to design specification and engineering requirementsquality of design measures how closely the characteristics of products or services match the needs and wants of customersconformance quality is the performance of a product or service according to design and production specificationsuncorrected nonconformance errors by producers and suppliers through changes to design production and inspection will result in product or service failure in the customers handsFinancial Perspectivethe costs of quality COQ are costs incurred to prevent or rectify the production of a lowquality productmanagement accountants who apply various techniques to measure these costs are producing a means to an endthe costs are important relevant information to managers who must decide on what action to take to achieve conformance targetsthese costs focus on conformance quality and are incurred in all areas of the value chainthey are classified into 4 categories1Prevention costs Costs incurred to preclude the production of products that do not conform to specifications2Appraisal costs Costs incurred to detect which of the individual units of products do not conform to specifications3Internal failure costs Costs incurred to detect a nonconforming product before it is shipped to customers4External failure costs Costs incurred to detect a nonconforming product after it is shipped to customersAnalyze QualityControl ProblemsInternal Business Processestools such as statistical quality control SQC or statistical process control SPC provide relevant nonfinancial quantitative infothese data are a formal means of distinguishing between random variation and nonrandom variation in an operating processa key method of reporting SQC results in a control chart which illustrates in a graph a time series of successive observations of a particular step procedure or operation taken at regular time intervalsonly outliers those observations outside the specified limits are ordinarily regarded as nonrandom and worth investigat
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