Baker Enterprises Implemented a Total Quality Management (TQM)program at the Beginning

question 65

Essay

Baker Enterprises implemented a total quality management (TQM)program at the beginning of 20x1,closely monitoring amounts spent on prevention cost,appraisal cost,internal failure cost,and external failure cost.By the end of 20x3,Baker noted a significant improvement in the quality of its finished-goods production,with management sensing that the firm was close to "optimum results from both a quality and expenditure perspective." The quality improvement,coupled with favorable ratings in Consumer Reports,has led to a sizable boost in sales volume.
Required:
A.Present two examples of prevention costs,appraisal costs,internal failure costs,and external failure costs.
A.Prevention: Quality training,reliability engineering,pilot studies,machine maintenance,purchase of top quality materials
Appraisal: Inspection,reliability testing
Internal failure: Scrap,repair,rework,downtime
External failure: Warranty costs,customer complaints,lawsuits,transportation costs to customer sites to fix problems,product returns,price allowances
B.1.Decrease: the company is close to the optimum point from an expenditure perspective.
2.Decrease: increased sales from quality improvements and favorable ratings likely translate into fewer lost sales and a better reputation.
3.Increase: more money spent upfront on prevention and appraisal costs will drive down failure costs,resulting in decreased total quality costs for the firm.
4.Decrease: highly effective prevention programs often result in a reduced need for inspection.
B.Baker's TQM program is functioning as expected from an operational perspective.In view of this situation,what has likely happened (increase,decrease,or no effect)to:
1.The amount spent on total quality costs from 20x1 through 20x3.
2.The amount of hidden costs incurred by the company from 20x1 through 20x3.
3.The percentage of quality expenditures on prevention and appraisal costs relative to the sum of internal and external failure costs.
4.The amount of effort expended on appraisal efforts if the company has gone somewhat overboard in its prevention programs.

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Definitions:

Punitive

Relating to punishment, often referring to punitive damages in legal contexts, which are awarded in addition to actual damages to punish the defendant and deter future misconduct.

Public Policy

Principles and standards considered by the government to be beneficial for the community and used as a guideline for legislative or regulatory actions.

Incidental Damages

Compensation for reasonably associated losses that occur as a direct result of a breach of contract or injury.

Resale Price

The price at which an item is sold again to the public, after being purchased from the original seller.