A method of measuring quality costs

Abstract

A method of measuring quality costs YOUNG K. SONt and LIE-FERN HSUt Improving product quality is now at the top of a manufacturer's priority list. Yet quality cost does not appear in accountingrecords because it is relatively newand unstructured, making it difficult to measure objectively, and because traditional accountingis too outdated to accommodate it. This paper illustrates a method of deriving a function of qualitycost, which requires cooperation amongdepartments such as accounting, quality control, and manufacturing.

Evaluating Quality Control Decisions: A Simulation Approach

“…The improvement made to the cost of quality model developed by Son and Lie (1991) that was described in section 3.1.4 adds acceptance sampling plans. Almost all quality control managers in the manufacturing firms develop and implement such plans.…”

“…In this section of the chapter we, intend to provide a brief description of the model developed by Son and Lie (1991) and the way it was modified to be suitable for our research idea. First, the notations of the model are presented.…”

“…Costs associated with sampling inspections prior entering the manufacturing system are not considered in the model developed by Son and Lie (1991). Our idea consists of the fact that companies often receive a shipment of material from a supplier and need to ascertain that the quality of the shipment.…”

“…From the voluminous literature, one may categorized the cost of quality models into five generic models which are: P-A-F model, Crosby model, opportunity or intangible cost model, process cost models and ABC (activity based costing) model. Traditional cost accounting approaches typically used to measure cost of quality has been reported in the literature to have serious limitations when dealing with the components of intangible costs (see Son (1991), Chiadamrong (2003) and Sharma (2007)). As manufactures continue to improve their factories, they discover that existing cost measure systems should be updated and no matter how sophisticated and reliable these economic evaluation measure maybe, such problems still remain if unreliable cost information is not obtained as inputs for these economic evaluation, Chiadamrong (2003).…”

Integrated quality and quantity modeling of a production line

“…Some studies have tried to find a linkage between high products qualities and companies' financial performances: for example Hendricks and Singhal [Hendricks and Singhal, 1997], [Hendricks and Singhal, 2001] demonstrate that companies that win quality awards outperform other firms on operating income measures as well as stock performance. Another group of studies attempt to develop economic measures of quality to find optimal operation policy to minimize total cost [Son and Park, 1987], [Son and Hsu, 1991], [Nandakumar et al, 19931.…”