News Technology, Inc., manufactures computerized laser printing equipment used by newspaper publishers throughout North America. In recent
Question:
Ben McDonough, News Technologys president, decided to devote more resources to the improvement of product quality after learning that his companys products had been ranked fourth in product quality in a recent survey of newspaper publishers. He believed that the company could no longer afford to ignore the importance of product quality. McDonough set up a task force which he headed to implement a formal quality-improvement program. Included on the task force were representatives from engineering, sales, customer service, production, and accounting, because McDonough believed this was a companywide program and all employees should share the responsibility for its success.
After the first meeting of the task force, Sheila Hayes, manager of sales, asked Tony Reese, the production manager, what he thought of the proposed program. Reese replied, I have reservations. Quality is too abstract to be attaching costs to it and then to be holding you and me responsible for cost improvements. I like to work with goals that I can see and count! I dont like my annual income to be based on a decrease in quality costs; there are too many variables that we have no control over!
News Technologys quality-improvement program has now been in operation for 18 months, and the following quality cost report has recently been issued. As they were reviewing the report, Hayes asked Reese what he thought of the quality program now. The work is really moving through the Production Department, replied Reese. We used to spend time helping the Customer Service Department solve their problems, but they are leaving us alone these days. I have no complaints so far. Ill be anxious to see how much the program increases our bonuses.
Required:
1. Identify at least three factors that should be present for an organization to successfully implement a quality-improvement program.
2. By analyzing the cost of quality report presented, determine if News Technologys quality-improvement program has been successful. List specific evidence to support your answer.
3. Discuss why Tony Reeses current reaction to the quality-improvement program is more favorable than his initial reaction.
4. News Technologys president believed that the quality-improvement program was essential and that the firm could no longer afford to ignore the importance of product quality. Discuss how the company could measure the opportunity cost of not implementing the quality-improvement program.
(CMA,adapted)
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
Step by Step Answer:
Managerial Accounting Creating Value in a Dynamic Business Environment
ISBN: 978-0078025662
10th edition
Authors: Ronald Hilton, David Platt