ABSTRACT
It will also be necessary to decide how to deal with overheads, since many quality costs are normally included as part of the overhead, whilst others are treated as direct costs and attract a proportion of overheads. Failure to clarify this can lead to a gross distortion of the picture derived from the analysis. It is also easy to fall into the trap of double-counting. For these and other reasons quality costs should be made the subject of a memorandum account However, the costs should not include recovery of overheads in calculating costs of personnel. Another issue to be decided is how costs are allocated to components, material and so forth which are scrapped. To simplify matters, a common practice is to value scrap at 100 per cent material cost plus 50 per cent of the finished part total labour/burden costs, irrespective of the actual stage of manufacture of the rejected part
Another area of difficulty is deciding whether some activities, usually of a set ting-up, testing or running-in type, are qualify activities or an integral and essential part of the production/operations activity. These costs are often substantial and can alter quite markedly the relative proportions of quality-related cost categories. There are also factors which serve to ensure the basic utility of the product and/or service, guard against errors, and protect and preserve qualify. Examples are the use of design codes, preparation of engineering, technical and administrative sys tems and procedures, capital premiums on machinery and equipment, document and drawing controls, and handling and storage practices. Whether such factors give rise to costs which may be regarded as being quality-related is a matter for judgement in individual cases. These problems need to be discussed with purchas ing, engineering, production/operations and accountancy personnel, as appropri ate, in order to resolve them. There is little doubt that deciding which activities should be included under the quality-related cost umbrella is by no means straightforward and there are many grey areas. Some qualify assurance managers have a tendency to include costs that are difficult to justify as being quality-related
and over which they have no control or influence. This overzealousness should be guarded against.
