Quality and Costs

This section discusses how quality has an impact on the costs of goods and services in an organization.Section 7, Quality and Income,addresses the issue of quality and sales revenue. Thus, the two sections provide a framework of how quality is related to the total financial picture of an organization. We identify and measure the costs associated with poor quality for three reasons: to quantify the size of the quality problem to help justify an improvement effort, to guide the development of that effort, and to track progress in improvement activities. Among the concepts and methodologies covered are traditional categories of quality costs, a broadened concept of categories including lost revenue and process capability costs, activity-based costing, data collection methods, return on quality, presentation of findings, gaining approval for an improvement effort, using cost data to support continuous improvement, optimum quality level, and reporting cost data. The underlying theme in the section is the use of quality-related costs to support a quality improvement effort rather than as a system of reporting quality costs.

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