The Study About Quality Costs Management Based On Activity-Based Costing

In the 1950s, the American quality management expert A. V. Feigenbaum submitted a quality costs report to his supervisor when he worked in the General Electric Corporation. This was the beginning of the study about quality costs. Since then people began to be aware of the importance of quality costs, and some quality management experts such as J. M. Juran and M. Landwhar, began to study quality costs. Quality costs management is the development of market economy. In the stage of demand exceeds supply, companies get great profits, they don't care the costs. But in the stage of supply exceeds demand, companies can't sell their products well, the profits decrease, in order to gain greater profits, they have to consider reducing quality costs. Since then quality costs management becomes an important issue in enterprises.To research quality costs management in the process of implementing Total Quality Management, it's useful to control quality costs, to satisfy customs' requirements about quality costs, to accelerate the leaders to attach the importance of quality management, to monitor and evaluate the quality system. The objective of quality costs management is to improve product quality through implementating quality improvement projects, and reduce quality fault costs, thereby to control the total quality costs.Looking at the domestic and international current situation on quality costs management, in the United States, the United Kingdom, Canada and other developed countries, the history of quality costs management was very long, some corporations have carried out quality costs management and achieved certain results, but overall, there are still lots of corporations don't run quality costs management or can't gain great results. In China, quality costs management began in 1978, 30 years later than the developed countries, and now quality costs management is in initial stage, on the other hand, in our country, quality management crossed the stage of Statistical Quality Control and accessed to Total Quality Management stage directly, therefore, there are many problems on the process of the study about quality costs management.Calculating quality cost is the focus of quality costs management. In order to collect all expenses data related to quality management activities, the premise of account is to establish scientific and reasonable quality cost subjects. The next work is to choose a scientific calculating method to calculate quality costs, and then to analyze quality costs in order to identify the reasons that caused increase of quality costs, at last to analyze these reasons and find out solutions to improve product quality and reduce quality costs. Compared with traditional cost calculating method, Activity-Based Costing (ABC) can distribute product costs more accurately. Nowadays, the domestic andinternational researches about ABC focus on logistics and indirectexpense of manufacturing costs. Even if a few researches aboutapplying ABC on quality costs management, they are just limited intheory. Therefore, combining with the actual data of a large domesticfoundry, this thesis studies the feasibility of applying ABC to qualitycosts management from theory, and how to apply in enterprises frompractice.This thesis includes seven chapters as follows:Chapter 1: Introduction. In this chapter, the history and current researchsituation of quality costs management was introduced, and thesignificance of studying quality costs management was indicated.Besides, the background of research, research content and significanceof this thesis were indicated too.Chapter 2: Basic theory of quality costs management. Although it hasbeen more than half a century since the birth of quality costs, but thereare still many corporations' leaders and quality staffs can't understandquality costs clearly, so the author introduced various definitions ofquality costs in detail, also the content and classification of qualitycosts and other related theories. At the same time, the author discussedseveral major activities of quality costs management based onpractices.Chapter 3: The study about setting up quality costs subjects in adomestic foundry (M Plant). It's an important prerequisite ofimplementing quality costs management to set up scientific and reasonable quality costs subjects. So in this chapter, the authordiscussed seven basic ideas of setting up quality costs subjects, andanalyzed the lack of current quality costs subjects in M plant, then setup new quality costs subjects.Chapter 4: The concepts and principle of ABC. ABC is the mainmethod used in this thesis, so its development, related concepts,principle and the mathematical model was introduced here.Chapter 5: Accounting quality costs of M plant by using ABC. Basedon M's costs data in the first half of 2006, ABC was applied tocalculate quality costs of M plant. It provided basis for quality costsanalysis and quality improvement.Chapter 6: M's quality costs analysis. According to using some qualitymanagement tools such as Trend Curve Figs, Pareto Figs and CausalFigs, the quality costs of M's in the first half of 2006 was analyzeddeeply, and a series of quality improvement measures were concluded,at last some attentions about making quality costs report and trackingcontrol results were summarized.Chapter 7: Conclusions and outlooks. In this chapter, severalconclusions of this thesis were summarized; besides, the futureresearch direction was forecasted.This is the first time to research the application of ABC on quality costsmanagement in enterprise. This thesis guides the ideas and specificmethods of implementing quality costs management, supplies referencefor enterprises to apply ABC and implement quality costs management,it has strong application significance.