Cost And Quality Management Plans Essay

Question:

Discuss about the Cost and Quality Management Plans.

Answer:

Deliverable report:

Quality cost allows a company to evaluate the extent to which the resources are used for the activities to maintain the quality of the services and products and to protect the cost that takes place due to external or internal failure. This assists the company in determination of the expected savings (Farooq et al., 2017). Quality costs are covered under this four categories:

  • Prevention cost – prevention costs are incurred to prevent a quality problem on the operation. This cost is less expensive as compared to the other quality costs and are therefore highly recommended. These costs include proper training of the employees regarding assembling of products or control of statistical process. This costs assists in reducing the scrap costs.
  • Appraisal cost – these costs are incurred to prevent a quality problem to take place. It is done through various inspection, for instance, the workers from production department inspect both the outgoing as well s incoming parts of their work place (Kaplan & Atkinson, 2015).
  • Internal failure costs – this cost is incurred when there is production of defective product. These costs are incurred in the form of reworked goods or scrapped goods. The cost for reworking is included under the cost only.
  • External failure cost – this cost is incurred when there is production of a defective product and to rework the product much more costs have to be incurred now in form of warranty claims, legal costs, product recall or the field services. The costs involved are mostly unquantifiable costs that are the cost associated with loss of customers (Sarkar & Moon, 2014).

From the given case study of Polyproducts Incorporated, it is identified that they are the leading producer of the rubber components and 800 people are employed by them, those are organized through the matrix structure. In Exhibit I, the salary projection of the employees are shown, whereas, in Exhibit II, overhead projections for next two years are revealed. They received a proposal from the Capital Corporation. To analyse the viability of the proposal they will assess the marketplace to establish the fact that whether they will be able to get competitive advantages or not. This task will be carried out by marketing group. To analyse this, the marketing group will present the prospectus of four competitive companies. After comparing with four competitors, if the proposal looks viable and profitable, then only Polyproducts Incorporated will accept the proposals from Capital Corporation.

Project

Estimated Hours

Developers

Analysts

Others

Total Cost

Status

Phase

Req.

Avg. Cost

Req.

Avg. Cost

Cost

1

Phase 1

8

3

$90

6

$90

$90

$2,250

1.1

Phase 1.1

8

1

$30

1

$30

$30

$510

1.2

Phase 1.2

8

1

$30

0

$30

$30

$270

1.3

Phase 1.3

8

1

$30

5

$30

$30

$1,470

2

Phase 2

8

13

$90

6

$90

$90

$4,650

2.1

Phase 2.1

8

1

$30

1

$30

$30

$510

2.2

Phase 2.2

8

5

$30

0

$30

$30

$1,230

2.3

Phase 2.3

8

7

$30

5

$30

$30

$2,910

3

Phase 3

8

7

$90

18

$150

$150

$6,150

3.1

Phase 3.1

8

2

$30

3

$30

$30

$1,230

3.2

Phase 3.2

8

2

$30

3

$30

$30

$1,230

3.3

Phase 3.3

8

1

$30

3

$30

$30

$990

3.4

Phase 3.4

8

1

$30

4

$30

$30

$1,230

3.5

Phase 3.5

8

1

$30

5

$30

$30

$1,470

Total

24

23

30

$330

$13,050

Work breakdown with cost breakdown structure

Reference

Farooq, M. A., Kirchain, R., Novoa, H., & Araujo, A. (2017). Cost of Quality: Evaluating Cost-Quality Trade-Offs for Inspection Strategies of Manufacturing Processes. International Journal of Production Economics.

Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.

Sarkar, B., & Moon, I. (2014). Improved quality, setup cost reduction, and variable backorder costs in an imperfect production process. International journal of production economics, 155, 204-213.

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