Memo Bma Task 1

Memo

To: Supervisor Tory Burke

From: Kari S, Senior Financial Advisor

Subject: Cost-Quality Relationship

Date: January 3, 2014

CC: All department managers

Our financial team is concerned with possible quality cost reductions, which have been discussed within this firm. It is my duty as senior financial advisor to urge against these cuts. Our quality reputation is the compelling force behind this firm’s success, and our strong customer loyalty base. Possible changes in our quality system would dwindle sales, discourage customers, and above all destroy our reputation. This firm’s goal has always been quality and it needs to remain our number one focus.

A. “Any serious attempt to deal with quality issues must take into account the costs associated with quality. Those costs can be classified into three categories: appraisal, prevention, and failure”. (Stevenson, 2009) Now I will offer details of these categories regarding quality costs.

B. Prevention costs are expenses, which attempt to prevent defects from happening. These costs include planning, working with vendors, administration systems, training, quality control measures, and additional attention in both design and production phases to reduce the probability of flawed workmanship.

Related to field-testing, inspection and other actions intended to discover defects in merchandise or services, and to ensure there are none; this defines appraisal costs. Appraisal costs are procedures or techniques to produce high quality products in initial stages of assembly.

Failure costs are expenses, which are incurred by flawed parts or products or by faulty services. Failure costs can be external or internal. Discovered after delivery to the customers are external failures; external failures are the least favorable costs for a company to incur because they can affect safety of customers and damage the reputation of the company. Internal failures are those discovered during the production...