A) “I work for a non-profit organization, so all this talk of the full cost of your product or service really isn’t applicable to me.”
I would have to disagree with the statement, as full cost of product or service is applicable; however, the majority of the time people or companies will donate or give a discount if asked. For example, if you work for a non-profit organization and are in need of office supplies, why not buy locally from people who support you such as Staples or Office Depot, if these stores are around your area. Local store managers at these stores, when approached, have the authority to donate items to nonprofit organizations. One way you might try this is to have your ...view middle of the document...
C) “An activity-based costing approach is too much work for what you get out of it. We’ve used one overhead rate for as long as I can remember, and it’s worked just fine.”
I would have to agree with this statement, as an activity-based costing approach may be too much work for some. Moreover, one of the basic issues surrounding ABC is the difficulty of implementation. Identifying activities or processes to be allocated properly is cumbersome and takes a lot of effort. It requires that processes are adequately mapped throughout the organization. For a company that has undertaken a quality effort, or an effort to reengineer business processes, a major part of the work may already be completed. But for those who have not it is likely to be a major undertaking.
Just as anything else, Activity-Based Costing is no panacea, nor should it be embraced as a religion, or a fad. It is an operational strategy that needs to be carefully reviewed for applicability. The best way to approach the situation is to first rationalize a facility and its processes, identify the opportunities, and then conceptualize a solution. If this fits, then use it.
D) “I know I probably would never be able to accurately measure it, but isn’t the true ‘cost of quality’ the profit I would have made on lost sales? You know, those sales lost if I had a reputation of poor quality in my product and service offerings?”
I would have to disagree with the statement, as ‘cost of quality’ does not pertain to the profit that would have been made on lost sales. Instead, ‘cost of quality’ is the sum of costs incurred in maintaining acceptable quality levels plus the cost of failure to maintain that level. Moreover, ‘cost of quality’ is the total costs of ensuring good quality or rectifying poor quality.
Cost of quality comprises of four elements. The first element is external failure cost, which pertains to cost associated with defects found after...