A company’s first quality cost report probably has the greatest effect. Managers are often surprised by the magnitude of the costs associated with defects. This is often enough by itself to propel the company into ambitious quality improvement programs. However, unless the firm’s chart of accounts is modified, compiling periodic quality cost reports is a time-consuming task. Moreover, some of the most important data—the data external to the firm—will almost always be missing. And, while the quality cost report can help steer managers in the appropriate direction (e.g., increase prevention costs), it cannot tell managers how to go about preventing defects. For these reasons, many companies stop producing quality cost reports once their quality improvement program is well established.
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