Activity Analysis in Business Management

Questions and Answers

What is the primary focus of Total Quality Management?

Employee empowerment and training

Production efficiency and speed

Continuous improvement and customer satisfaction (correct)

Minimizing costs and maximizing profits

What is the goal of Total Value Chain Analysis?

To identify non-value-added activities (correct)

To improve employee empowerment

To increase customer satisfaction

To reduce production costs

Which of the following is an example of a prevention cost?

Employee training (correct)

Rejected product units

Inspection of the final product

Product testing

What is an internal failure cost?

Production loss caused by downtime Signup and view all the answers

Which of the following is a key success factor for Total Quality Management?

Continuous improvement Signup and view all the answers

What is an external failure cost?

Lost profits from lost customers Signup and view all the answers

What is the main objective of Activity-based Management?

To identify non-value-added activities Signup and view all the answers

Which of the following is an example of an appraisal cost?

Inspection throughout production Signup and view all the answers

What is the primary goal of Quality Cost Management?

To minimize quality costs Signup and view all the answers

What is a value-added activity?

Activity that improves customer satisfaction Signup and view all the answers

Study Notes

Activity Analysis

Activity analysis is the process of studying activities performed in fulfillment of business functions.
An activity is a repetitive action performed to achieve business objectives.
Activities can be classified into two categories: Value-Added (VA) and Non-Value-Added (NVA).

Value-Added (VA) Activities

VA activities increase the value of products or services to customers.
Examples of VA activities:
- Necessary or required to meet customer requirements or expectations.
- Enhance purchased materials of a product.
- Critical steps that cannot be eliminated in a business process.
- Resolve or eliminate quality problems.

Non-Value-Added (NVA) Activities

NVA activities consume time, resources, or space, but add little value to customer needs.
Examples of NVA activities:
- Can be eliminated without affecting the form, fit, or function of the product/service.
- Begin with prefix "re" (e.g., rework or returned goods).
- Result in waste and add little or no value to the product/service.
- Performed due to unhappy or dissatisfied customers.
- Prefer to do less of if given the option.

Activity-Based Management (ABM)

ABM helps managers understand the relationship between a firm's strategy and the activities and resources needed to implement it.
ABM is critical for cost leadership business strategy.
ABM focuses on accountability for activities rather than costs and emphasizes system-wide performance improvement.
Both financial and non-financial measures of performance are important in ABM.

Master Production Schedule (MPS) and Material Requirements Planning (MRP)

MPS specifies what is to be made and when, in accordance with a production plan.
MRP ensures that the right materials are available in the right quantities and at the right time.
MRP determines the feasibility of a schedule within capacity constraints.

Total Quality Management (TQM)

TQM involves all business functions in continuous quality improvement.
Goals of TQM: customer satisfaction, minimize costs, and maximize quality.
TQM focuses on continuous improvement and customer satisfaction.
Key success factors of TQM: cost, quality, innovation, customer satisfaction, employee empowerment, and continuous improvement.

Quality Costs

Four types of quality costs:
1. Prevention costs: avoid poor quality goods or services (e.g., employee training, improved materials, preventive maintenance).
2. Appraisal costs: detect poor quality goods or services (e.g., inspection, product testing).
3. Internal failure costs: avoid poor quality goods or services before delivery to customers (e.g., production loss, rejected product units).
4. External failure costs: incurred after defective product is delivered (e.g., lost profits, warranty costs, service costs at customer sites).

Description

Learn about activity analysis, a process of studying repetitive actions performed in fulfillment of business functions, and understand value-added and non-value-added activities. Quiz covers activity-based management and its importance in meeting customer requirements and expectations.