Question

write it as short answer plzz

Q 1     Salem Corporation is producing product A. The company had problems related to quality. Customers have been returning the product in the last months.

?ABC costing method and ABM can be used to manage quality.

a.?Define each type of quality-related activity and give one example of each activity type.

b.?Suppose the managers implement an ABC system to measure the costs of quality. How could they use information from this system to improve the product?

Answer 1

Answer (a):

ABC Costing & Example:

Activity-based costing is a method of assigning indirect costs to products and services which involves finding cost of each activity involved in the production process and assigning costs to each product based on its consumption of each activity.

Example:

Activity-based management (ABM) & Example:

Activity-based management (ABM) is used to determine the profitability of every aspect of a business, so that those areas can be upgraded or eliminated. The intent is to achieve a more fine-tuned organization with a higher level of profitability.

Example:

ABM can help the firms to develop appropriate company strategy, long-term plans and competitive advantage by focusing on and managing activities. Some firms have competitive advantage by providing a low-cost product or manage activities to reduce costs. To reduce costs generally requires changes in activities. Anyone can cut costs—if the operation is closed, costs will be reduced. However, ABM has the objective of cutting costs while maintaining quality and quantity of output.

Answer (b):

With the help of ABC system, the company can use the information from this system to identify the area or activity in the manufacturing process which caused the defect or defiency in the quality of the product. Consequently, the company will be able to charge the loss of defect to that particular activity identified. Thus the company gets true profitability of the activity.