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Managerial Accounting:
An Introduction To Concepts, Methods, And Uses
Chapter 4
Strategic Management
of Costs, Quality, and Time
Maher, Stickney and Weil
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Learning Objectives (Slide 1 of 2)
Distinguish between the traditional view of quality and the quality-based view.
Define quality according to the customer.
Compare the costs of quality control to the costs of failing to control quality.
Explain why firms make trade-offs in quality control costs and failure costs.
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Learning Objectives (Slide 2 of 2)
Describe the tools firms use to identify quality control problems.
Explain why just-in-time requires total quality management.
Explain why time is important in a competitive environment.
Explain how activity-based management can reduce customer response time.
Explain how traditional managerial accounting systems require modifications to support total quality management.
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Explain Traditional Versus Quality-Based View
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What is quality according to the customer?
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List Some Examples of Performance Measures
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Quality Control
Improving quality may be costly, but failing to improve quality may be equally costly
Costs of controlling and improving quality include what?
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Prevention Costs
What are some prevention costs?
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Appraisal Costs
Costs to detect individual units of products that do not conform to specifications include:
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Costs of Failing to Control
& Improve Quality (Slide 1 of 2)
Internal failure costs - costs of detecting nonconforming products and services before delivery to customers
Scrap
Rework to correct defects
Reinspection/retesting after completing rework
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Costs of Failing to Control
& Improve Quality (Slide 2 of 2)
External failure costs - costs of detecting nonconforming products and services after delivery to customers
Warranty repairs
Product liability resulting from product failure
Marketing costs to improve tarnished company image
Lost sales from customer dissatisfaction
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Identifying Quality Problems
Signals provided by these tools may be:
Warnings - indicate that something is wrong
Diagnostic- suggest cause of problem and possible solutions
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Explain Control Charts
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Discuss Pareto Charts
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Review Cause-and-Effect Analysis
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JIT and Total Quality Management
Just-In-Time philosophy requires high quality standards
System must immediately correct problems resulting in defective units
JIT helps prevent production problems from going undetected
Also requires a smooth production flow without downtime to correct problems
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Importance of Time in a Competitive Environment
Competitive markets demand shorter new-product development and more rapid response to customers
Customer response time falls into two categories:
New-product development time
Operational measures of time
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Comment on New-Product Development Time
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What is break-even time?
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What are operational measures of time?
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Activity-Based Management to Improve Customer Response Time
ABM helps improve customer response time by identifying :
Activities that consume the most resources, both in dollars and time
Non-value-added activities
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Describe Customer Response Time
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Balanced Scorecard
Reports an integrated group of financial and nonfinancial performance measures, includes the following four areas
Financial
Internal business processes
Learning and Growth
Customer
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Draw a Balanced Scorecard & Include
Sample Measures
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Review Total Quality Management
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If you have any comments or suggestions concerning this PowerPoint Presentation for Managerial Accounting, An Introduction To Concepts, Methods, And Uses, please contact:
Dr. Michael Blue, CFE, CPA, CMA [email protected]
Bloomsburg University of Pennsylvania