AVM1 Task 1- Memo (Taylor Mays) _ References Page Added
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AVM1 Task 1- Memo
To: Supervisor
From: Taylor Mays
Subject: Cost-Quality Relationship
To guarantee the quality of our products it is essential to integrate specific types of costs such as: appraisal, prevention, and failure
. These quality costs will be expanded upon in this memo, but it is important that it is brought to your attention that there are two branches within failure costs: internal and external
. First, the quality cost we will be discussing for clarification is appraisal costs. Appraisal costs are costs related to evaluating and inspecting our products and services. As we discussed, per our previous correspondence, we have been encountering issues with equipment being severely outdated and this is impacting our production. Our equipment being so outdated and in need of repairs is resulting
in less tangible products being produced. An example of these appraisal costs is the
cost of having our equipment and machinery inspected and thus, the interruption of
production.
2
The second quality cost to be discussed is prevention costs. Prevention costs are costs related to doing everything we can to prevent or reduce potential quality issues. This may seem familiar to you because we are currently in collaboration with several companies to help our company to implement various training programs that will assist our production team in reducing quality issues. As stated above, examples of prevention costs include quality improvement programs, training, and more. Third, let’s discuss failure costs. Failure costs can either be internal or external. Internal failure costs are costs related to defective products before they are delivered to customers. Examples could be anything from rework costs that can
be quite expensive to material losses and problem solving. External failure costs are costs related to anything after
a delivery has been made or is in the process
of being delivered. Examples include returned goods, warranty costs, penalties, and loss of customers due to the failure. Now, onto trade-offs. A trade-off
is when you exchange one thing for another. For example, a potential trade-off for improving marketing efforts at your company would be the cost of hiring more qualified staff for the marketing team. With the above example in mind, a possible trade-off for appraisal costs is having a
slower production time. This is due to having to spend time inspecting equipment
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