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.
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COD Question in Kit:
Hi Ken, Hope you doing great.
Failure costs have increased from 3.46m in 2010 to 4.35m in 2011. These costs are a measure of quality costs in order to assess the productivity
It later said under the quality heading in operational performance measures that failure costs can also be used as a measure of quality AND THEY WOULD BE IMPROVED AS MEASURES IF ACTUAL COSTS WERE COMPARED TO BUDGETED COSTS.
I couldn’t understand this point, How are they going to improve as a measure when actually they have increased from the previous year ? If you can clarify please
Thanks
Failure costs increasing is not necessarily bad: production might have increased and failure costs could be proportional.
Therefore, better to compare to a budget. The budget could be set a little tighter each year to try to encourage improvement.
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