Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 24

Graphical Depiction: Is There an Optimal Level of Spending on Quality, or Is Quality “Free”? Some proponents of TQM assert that quality is free, that is, that quality is a never-ending quest and that improving product/service quality will reduce a firm’s total spending on quality. Others believe that after a point there are diminishing returns to additional expenditures on quality. Provide a graphical representation of each of these arguments. (Hint: Let the vertical axis of your graph represent $ (e.g., revenues or costs), and let the horizontal axis represent the level of quality—the higher the value, on the x-axis, the greater the indicated quality level.) Supplement your graphs with appropriate explanations/interpretations.

Step 1 of 2

When there is a company producing goods and services, then it is very important for the company to control the quality of products produced. High level of variation in product quality will make batch unacceptable, so it is necessary to control quality and that too with cost-effectiveness.