Activity-based accounting for total quality

Article Abstract:

Activity-based accounting is an ideal cost accounting technique for promoting stringent quality management. Activity-based accounting requires managerial accountants to analyze activities in the context of determining their value to the customer. Under a total quality management philosophy, the company will seek to give its units autonomy, reduce the layers of management, and optimize staff support. Activity-based accounting can be used to assign corporate-level costs to the firm's business units. The accountant must analyze functions performed by headquarters staff members to determine what services are needed by the customer and which activities are most important to customers through a customer survey. The accountants should then determine the cost drivers. This activity-based approach enables management to prioritize services. Only those activities that are needed by the business units and add value should be performed.

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Quality and profitability: have controllers made the connection?

Article Abstract:

The costs of quality improvement in a manufacturing environment can be separated into three main areas: preventing defects, meeting product specifications, and product failure. A survey of controllers from 94 Fortune 500 companies examined how the organizations measure quality costs on a regular basis, and how companies measure quality costs. Thirty-one percent of those sampled conduct quality cost measurement, with the percentages being much higher in certain industries such as farm equipment and automobiles. Factors that determine controller participation in quality cost measurement include: senior management commitment to improving quality, availability of resources for special studies, and the extent of controller participation in other team projects involving quality assurance.

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Controlling quality costs

Article Abstract:

Companies are employing more quality control programs on the individual product level or manufacturing process level. It is important to consider quality control at the total production level. Total quality control costs are the sum of defect control costs, product failure costs, and the costs of lost sales. To minimize these costs, it is necessary to understand exactly what they are, and more importantly, their interrelationships. Prevention costs affect defect costs, which in turn affect failure costs. Total quality control costs can help determine a total production control system.

Finance, Accounting, New product failure

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