What are the 4 categories of quality costs?
Prevention, Appraisal, Internal Failure, External Failure
3 Examples of Prevention Costs
Employee training, quality engineering, preventive maintenance
3 Examples of Appraisal Costs
Inspection, Testing, Quality audits
3 Examples of Internal Failure Costs
Scrap, Rework, Downtime
3 Examples of External Failure Costs
Warranty claims, returns, recalls
What do quality cost reports measure?
The cost of preventing/identifying defects and the cost of failures
What are the 4 Balanced Scorecard catergories?
Financial, Customer, Internal business process, Learning & Growth
2 examples of Financial performance measures
ROI and profit margin
2 examples of customer performance measures
Customer satisfaction & on-time delivery
2 examples of Learning & Growth measures
Employee training & Employee turnover
What 2 traits make a cost “relevant”?
Future cost + differs between alternatives
Are sunk costs relevant ?
No
Are allocated fixed costs usually relevant?
Not usually
How do you rank projects using the payback method?
Shortest payback = Highest Ranking
Sunk Costs
Already incurred and cannot be avoided regardless
Opportunity Cost
The benefit you miss out on by choosing one option instead of another
Differential Analysis
Looking at only the future costs and benefits that change between your options
Differential Cost
Future cost that differs between any 2 alternatives
