Name : Nadiatul Qalbi Amalia Rizqi

Student ID : 041911333077

COST OF QUALITY & PRODUCTION LOSSES

Cost of quality is defined as a methodology that allows an organization to determine

the extent to which its resources are used for activities that prevent poor quality, that
appraise the quality of the organization's products or services, and that result from
internal and external failures.

Types of Cost of quality :

1. Prevention Cost
 Incurred to prevent or avoid quality problems. These costs are associated
with the design, implementation, and maintenance of the quality management system.

2. Appraisal Cost
associated with measuring and monitoring activities related to quality.
These costs are associated with the suppliers’ and customers’ evaluation of purchased
materials, processes, products, and services to ensure that they conform to
specifications.

3. Failure Cost
Incurred to remedy defects discovered by customers. These costs occur
when products or services that fail to reach design quality standards are not detected
until after transfer to the customer.

Accounting for Production Losses

1. Scrap Material
Covering material left over from the production process that couldn't used
again for the same purpose but useful for other purposes or can sold to other parties.
Issues to deal with the scrap material is “recognizing the revenue”
2. Defective Product
product units that are not meet production standards but, both facets
technically or economically, it can be improved (reprocessed) in order to be sold as
standard or substandard product. The defect product accounting problem is regarding
additional cost treatment production going on to fix it.
3. Spoilage
Spoilage occurs when goods are damaged beyond rectification. Spoilage is
disposed off without further processing. Spoilage cost is the cost upto the point of
rejection less sale value. The method of sale of spoilage depends on the extent of
spoilage. Some of the spoilage is sold as seconds if the extent of damage is less; rest
may be sold as scrap or treated as waste.