lesson-10-Quality-and-time-英文管理會(huì)計(jì)課件-Management-Acc

QualityandtimeLesson101QualityandtimeLesson101Introductionoflesson10examinestherelationshipbetweencost,quality,andtime,roducesthecost-of-qualityreport,andlinksitwithbenchmarkingtooutlinetherelationshipbetweenqualityandcorporatestrategy.discussthetheoryofconstraints2Introductionoflesson10examiLesson10TopicsoutlineQualityasacompetitivenesstoolCostsofqualityAnalyzingandimprovingqualityCostsandbenefitsofqualityimprovementCostsofdesignqualityEvaluatingqualityperformanceTimeandcompetitivenessTimedriversandcostsoftimeTheoryofconstraints3Lesson10TopicsoutlineQualiTopic1:

QualityasacompetitivenesstoolLearningObjectiveExplainhowqualityisusedasacompetitivenesstool.RequiredreadingChapter19,pages532-5344Topic1:QualityasacompetitQualityasaCompetitiveToolCompanieshavelearnedthatmarketsharecanbeerodedbypoorqualityproductsorservice.Qualityisdefinedas

thetotalfeaturesandcharacteristicsofaproductoraservicemadeorperformedaccordingtospecificationstosatisfycustomersatthetimeofpurchaseandduringuseTopic1:Qualityasacompetitivenesstool5QualityasaCompetitiveToolCQualityasaCompetitiveToolFocusingonthequalityofaproductwillgenerallybuildexpertiseinproducingit,lowerthecostsofmakingit,createcustomersatisfactionforcustomersusingit,andgeneratehigherfuturerevenuesforthecompanysellingitTopic1:Qualityasacompetitivenesstool6QualityasaCompetitiveToolFTermsassociatedwithqualityThetermqualityreferstomanyfactors,includingdegreesoffitnessforuse,levelsofcustomersatisfaction,anddegreeofmeetingdesignandengineeringspecifications.Topic1:Qualityasacompetitivenesstool7TermsassociatedwithqualityTTermsassociatedwithqualityGraderelatestodifferencesindegree,

worth,orrankingbetweenproductsor

servicesthathavethesamefunctionaluse,

forexample,thedifferencebetweenadot

matrixprinterandalaserprinter.

Qualityofdesignisthedegreetowhicha

company’sdesignspecificationsfora

productorservicemeetcustomer’s

expectationsforthegradelevelchosen.

Qualityofconformanceisthedegreeto

whichtheproductmeetsitsdesign

specificationsandisfreeofdefectsthat

mightaffectappearanceorperformance.Topic1:Qualityasacompetitivenesstool8TermsassociatedwithqualityGQualityandFailureTopic1:QualityasacompetitivenesstoolActualPerformanceDesignSpecificationsCustomerSatisfactionConformanceQualityFailureDesignQualityFailure9QualityandFailureTopic1:QuTopic3:AnalyzingandimprovingqualityLearningObjectiveOutlinethethreemethodscompaniesusetoidentifyinternalqualityproblems.RequiredreadingChapter19,pages538-540,from“TheInternal-Business-ProcessPerspective:AnalyzingQualityProblemsandImprovingQuality”upto“RelevantCostsandBenefitsofEvaluatingQualityImprovement”10Topic3:AnalyzingandimproviTheInternalBusinessProcessPerspective Whenacompanyhasqualityproblems,itmustidentifyandanalyzetheproblemsinordertoimprovetheirquality.Therearethreemethodsthatcanhelpthemidentifythesourceoftheproblems.ControlChartsParetoDiagramsCause-and-EffectDiagramsTopic3:Analyzingandimprovingquality11TheInternalBusinessProcessControlChartsStatisticalQualityControl(SQC)isaformalmeansofdistinguishingbetweenrandomandnonrandomvariationsinanoperatingprocessControlChartsareapartofSQC.ControlChartsareagraphofaseriesofsuccessiveobservationsofaparticularstep,procedure,oroperationtakenatregularintervalsoftime.Topic3:Analyzingandimprovingquality12ControlChartsStatisticalQualControlChartsEachobservationisplottedrelativetospecifiedrangesthatrepresentthelimitswithinwhichobservationsareexpectedtofall.OnlythoseobservationsoutsidethecontrollimitsareordinarilyregardedasnonrandomandworthinvestigatingTopic3:Analyzingandimprovingquality13ControlChartsEachobservationQualityControlChartsIllustratedTopic3:AnalyzingandimprovingqualityAccordingtothe2-sigmarule,apointthatfallsoutofthe2-sigmarangewouldoccurinanormaldistributiononly5%ofthetimeandshouldbeinvestigated.14QualityControlChartsIllustrParetoDiagramsObservationsoutsidecontrollimitsserveasinputsforParetoDiagramParetoDiagramachartthatindicateshowfrequentlyeachtypeofdefectoccurs,orderedfromthemostfrequenttotheleastfrequentTopic3:Analyzingandimprovingquality15ParetoDiagramsObservationsouParetoDiagramIllustrationTopic3:Analyzingandimprovingquality16ParetoDiagramIllustrationTopCause-and-EffectDiagramsProblemsidentifiedbytheParetoDiagramareanalyzedusingcause-and-effectdiagramsCause-and-EffectDiagrams

Identifiespotentialcausesofdefectsusingadiagramthatresemblesthebonestructureofafish.AlsocalledFishboneDiagrams.Topic3:Analyzingandimprovingquality17Cause-and-EffectDiagramsProblCause-and-effectDiagramsMethodsandDesignFactorsHumanFactorsMachine-relatedFactorsMaterialsandComponentsFactorsMultiplesuppliersFlawedpartdesignIncorrectmanufacturingsequencePoormaintenancePoortrainingNewoperatorInadequatesupervisionPoorlymachinedpartsIncorrectspeedInadequateMeasurementtoolsVariationinpurchasedcomponentsIncorrectcomponentspecificationMishandlingofpurchasedpartsTopic3:Analyzingandimprovingquality18Cause-and-effectDiagramsMethoTopic2:

CostsofqualityLearningObjectiveEvaluateacost-of-qualityprogrambycalculatingcategoriesofcostandanalyzingnonfinancialmeasures.RequiredreadingChapter19,pages535-538,from“TheFinancialPerspective:CostsofQuality”upto“TheInternal-Business-ProcessPerspective:AnalyzingQualityProblemsandImprovingQuality”19Topic2:CostsofqualityLearnCostofqualityQualitycomesatacost.Thecostsofqualityarethecoststhatexistbecausepoorqualitymayordoesexist.Improvingqualitymaybecostly,butfailingtoimprovequalitymaybeequallycostlyCostofqualityisacomprehensive,plant-orcompanywidefinancialmeasureofqualityperformance.Mostqualitycosts

areassociatedwiththequality-of-conformancefactor.Topic2:CostofQuality20CostofqualityQualitycomesaCostofqualityInordertomaximizethequalitywhileminimizingthecostofthatquality,itisimportantforcompaniestodeterminewhatthosequalitycostsareandtobesuretheyarespendingthemoneyintherightwayattherighttime.Topic2:CostofQuality21CostofqualityInordertomaxCostofqualityQualitycostsareassociatedwithtwosubcategoriesofquality-relatedactivities:Controlactivities__controlcostsPerformedbyanorganizationtopreventordetectpoorqualityFailureactivities__failurecostsCostsoffailingtocontrol&improvequalityPerformedbyanorganizationoritscustomersinresponsetopoorquality.Topic2:CostofQuality22CostofqualityQualitycostsaCategoriesofcostofqualityof

conformanceExpendituresonqualityaregroupedintofourcategoriesandpresentedinacost-of-qualityreport.PreventionAppraisalInternalfailureExternalfailureTopic2:CostofQualitycostsincurredasaresultofproducingproductsthatdonotmeetqualitystandards

costsincurredtopreventtheproductionofsuchproducts.Control

costsFailure

costs23CategoriesofcostofqualityPreventioncostThecostsofdesigning,implementing,andmaintaininganactivequalityassuranceandcontrolsystem.ThepreventioncostincludesthecostsofDesignengineeringandprocessengineeringsupplierevaluations,preventativeequipmentmaintenanceQualitycontrolsystemQualityplanningQualitytrainingTopic2:CostofQuality24PreventioncostThecostsofdeAppraisalcostcostsincurredtodetectunitsthatdonotmeetspecifications.

Thecostsofensuringthatmaterialsandproductsmeetqualityconformancestandards.TheappraisalcostincludesthecostsofInspectingrawmaterialsandpurchasedpartsin-processandfinishedproductsonlineproductmanufacturing,andprocessinspectionProducttestingTopic2:CostofQuality25AppraisalcostcostsincurredtInternalfailurecostCostsincurredondefectiveproductsbeforetheyareshippedtocustomers.TheinternalfailurecostincludesthecostsofScrap&SpoilageReworkMachinerepairsManufacturing/processengineeringoninternalfailuresDowntimeduetodefectsDiscountsonsalesofsubstandardpartsandmaterialsTopic2:CostofQuality26InternalfailurecostCostsincExternalfailurecostCostsincurredondefectiveproductsaftertheyareshippedtocustomers.TheexternalfailurecostincludesthecostsofcustomersupportHandlingcustomercomplainsandclaimsrework/warranty,andreplacementRecallcostsmanufacturing/processengineeringonexternalfailures,FreightandrepairsofreturnedmerchandiseProductliabilityclaims/lawsuitscostsoflostreputationLostsalesCustomerill-willTopic2:CostofQuality27ExternalfailurecostCostsincPreparingaCOQreportStep1:DeterminedirectandindirectqualitycostsStep2:CategorizequalitycostsItismostusefultopresentthesequalitycostsintermsofasalespercentagesothattheimpactofqualitycostontheprofitabilityofthecompanyislinkedandapparent.Step3:AnalyzenonfinancialinformationTopic2:CostofQuality28PreparingaCOQreportStep1:ActivitycostingapproachusedforqualitycostsIdentifythechosenproductforwhichthelevelofqualitycostsaresought.Identifytheproduct’sdirectcostsofqualitysuchasinspectorsandworkersinrepairareas.Selectthecostallocationbasetouseforallocatingindirectcostsofqualitytotheproduct.Identifytheindirectcostsofqualityassociatedwitheachallocationbase.Computetherateperunitofeachallocationcostbaseusedtoallocateindirectcostsofquality.Computetheindirectcostsofqualityallocatedtotheproduct.ComputethetotalcostsofqualitybyaddingalldirectandindirectcostsofqualityassignedtotheproductTopic2:CostofQuality29ActivitycostingapproachusedActivity-BasedCOQAnalysisIllustrationTopic2:CostofQualityExhibit19-230Activity-BasedCOQAnalysisIlInterpretaqualitycostreportThecostsareusuallycomparedtoabudgetortothecostsforthepreviousperiod.Oncecostsofqualityarecategorized,companiesoftenfindthatspendingalittlemoreonpreventionandappraisalresultsinsignificantsavingsinfailurecosts.Topic2:CostofQuality31InterpretaqualitycostreporQualityCostGraphCosts100%%ofoutputwithoutdefectsCostsofcontrolCostsoffailureTotalqualitycost0Topic2:CostofQuality32QualityCostGraphCosts100%%ContemporaryQualityCostGraphCost0PercentDefects100%FailureCostsControlCostsTotalQualityCostsTopic2:CostofQuality

33ContemporaryQualityCostGrapOpportunityCostTopic2:CostofQualityExhibit19-234OpportunityCostTopic2:CostTopic4:CostsandbenefitsofqualityimprovementLearningObjectiveAnalyzerelevantcostsandbenefitsofqualityimprovements.RequiredreadingChapter19,pages540-541,”RelevantCostsandBenefitsofEvaluatingQualityImprovement”35Topic4:CostsandbenefitsofIdentifyrelevantcostsInevaluatingalternativesolutionstodealingwithqualityproblems,thecompanyshouldutilizerelevantcostanalysis.ThisisdoneinasimilarmannerascoveredinChapter11(DecisionMakingandRelevantInformation)Thekeyquestionishowtotalcostsandtotalrevenueswillchangeundereachalternativesolution.Topic4:Costsandbenefitsofqualityimprovement36IdentifyrelevantcostsInevalCostsandbenefitsofqualityimprovementSomerelevantcostsandbenefitswhenattemptingtoincreasequalitymightinclude:EstimatedincrementalcostsofeachalternativeCostsavingsfromlessrework,customersupport,andrepairsIncreasedcontributionmarginfromhighersalesasaresultofbuildingareputationforqualityandperformance.Topic4:Costsandbenefitsofqualityimprovement37CostsandbenefitsofqualityCostsandbenefitsofqualityimprovementTopic4:CostsandbenefitsofqualityimprovementDifferenceinfavorofredesigningframesExhibit19-638CostsandbenefitsofqualityComparativeanalysisManagersmakestrategicchoicesbasedontheresultsoftheanalysis;thesechoicesthenrequireafurthersensitivityanalysis.Managersmustconsiderthefollowingeffectsofnonfinancialinformationandunderlyingeconomicconditions,whichmaychangelevelsofsalesandproductioncosts.OpportunitycostsTheCOQreportTrendsofqualitycostsovertimeEthicalissuesTopic4:Costsandbenefitsofqualityimprovement39ComparativeanalysisManagersmComparativeanalysisOpportunitycoststhelostcontributionmarginonthealternativeprocess.Poorlydesignedprocesses—production,marketing,distribution,andcustomerservice—resultinlostopportunitycosts.TheCOQreportDeterminestheimpactofinterdependenciesacrossthefourcategoriesofquality-relatedcostsTopic4:Costsandbenefitsofqualityimprovement40ComparativeanalysisOpportunitEthicalissuesChanginganinternalprocessmaydecreasedefectsbutincreasetheuseofanon-renewableresource.Otherissuesinthisareamightbethesafetyofemployeesinthemanufacturingprocessandthesafetyofcustomersintheuseoftheproduct.Topic4:Costsandbenefitsofqualityimprovement41EthicalissuesChanginganinteTopic6:

Evaluatingquality

performanceLearningObjectiveEvaluatequalityperformanceusingfinancialandnonfinancialmeasures.RequiredreadingChapter19,pages542-543,“EvaluatingQualityPerformance”42Topic6:Evaluatingquality

peTrendAnalysisQualityCostsActualSales%ofSales2000$440,000$2,200,00020.0%2001423,0002,350,00018.02002412,5002,750,00015.02003392,0002,800,00014.02004280,0002,800,00010.0Thetrendsareevaluatedtodeterminewhetherprogressisbeingmade.Assumethefollowingdata:Topic6:Evaluatingqualityperformance43TrendAnalysisQualityCostsMultiple-PeriodTrendGraph:

TotalQualityCosts5101520012345%ofSalesYearTopic6:Evaluatingqualityperformance44Multiple-PeriodTrendGraph:

TMultiple-TrendAnalysisforIndividualQualityCosts

InternalExternalPreventionAppraisalFailureFailureTotal20002.0%1 2.0% 6.0% 10.0 %20%2001 3.0 2.4 4.0 8.61820023.0 3.0 3.0 6.01520034.0 3.0 2,5 4.5142004 4.1 2.4 2.0 1.510Assumethefollowingqualitycostdata:1Expressedasa%ofsalesRedesigningtheproductionprocesscanincreasepreventioncostsbutcauseareductionininternalandexternalfailurecosts.Topic6:Evaluatingqualityperformance45Multiple-TrendAnalysisforInMultiple-PeriodTrendGraphic:IndividualQualityCostCategoriesPercentageofSales10987654321001234YearExternalfailureInternalfailurePreventionAppraisalManyalternativeswillhavemulti-periodeffects.Topic6:Evaluatingqualityperformance46Multiple-PeriodTrendGraphic:Advantagesofcostofqualitymeasures

Theyareconsistentwiththeattention-directingroleofmanagementaccountingbyfocusingattentiononthecostsofpoorquality.TotalCOQprovidesameasureofqualityperformanceforevaluatingtrade-offsamongpreventioncosts,appraisalcosts,internalfailurecosts,andexternalfailurecosts.COQmeasuresassistinproblemsolvingbycomparingcostsandbenefitsofdifferentquality-improvementprogramsandsettingprioritiesforcostreductions.Topic6:Evaluatingqualityperformance47AdvantagesofcostofqualityLimitationsofQualityCostInformationSimplymeasuringqualitycostproblemsdoesnotsolvequalityproblems.Resultsusuallylagbehindqualityimprovementprograms.Themostimportantqualitycost,lostsales,isoftenomittedfromqualitycostreports.Topic2:CostofQuality48LimitationsofQualityCostInCostofQualityExclusionsOpportunityCostsasaresultfrompoorquality:ContributionMarginandIncomeforegonefromlostsalesLostProductionLowerPricesExcludedduetoestimationdifficultiesandbeingunrecordedastothefinancialaccountingrecordsTopic2:CostofQuality49CostofQualityExclusionsOppoNonfinancialmeasureofqualityThefinancialcostsrepresentonlyaportionofthetotalcostofquality.Prevention,appraisal,andinternalfailurecostsalsohavenonfinancialmeasures,includingthedefectrates,reworkpercentages,andnumberofdesignchanges.Nonfinancialmeasuresofqualityareatleastasimportantasthecostsofquality(COQ)measures.Topic6:Evaluatingqualityperformance50NonfinancialmeasureofqualitNonfinancialmeasureofqualityNonfinancialMeasuresofCustomerSatisfactioninclude:CustomerPerspectiveInternalPerspectiveLearning&GrowthPerspectiveTopic6:Evaluatingqualityperformance51NonfinancialmeasureofqualitNonfinancialmeasureofqualityCustomerPerspectiveSurveysonsatisfactionMarketshareNumberofdefectiveunitsshippedtocustomersNumberofcustomercomplaintsProductfailratesDeliverydelays/On-timedeliveriesTopic6:Evaluatingqualityperformance52NonfinancialmeasureofqualitNonfinancialmeasuresofquality

InternalbusinessPerspectivePercentageofdefectiveproductsAveragetimetorepairtheproductsatcustomersitesPercentageofreworkedproductsNumberofdifferenttypesofdefectsanalyzedNumberofdesignandprocesschangesmadetoimprovedesignqualityorreducecostsofqualityTopic6:Evaluatingqualityperformance53NonfinancialmeasuresofqualiNonfinancialmeasuresofquality

TheLearning&GrowthPerspective

EmployeeturnoverratioEmployeeempowerment–numberofprocessesinwhichemployeeshavetherighttomakedecisionswithoutconsultingsupervisorsEmployeeSatisfactionEmployeeTrainingTopic6:Evaluatingqualityperformance54NonfinancialmeasuresofqualiAdvantagesofnonfinancialcostofqualitymeasures

Theyarefrequentlyeasytoquantifyandunderstand.Theydirectattentiontophysicalprocessesandhelpmanagersidentifythepreciseproblemareasthatneedimprovement.Measures,suchasnumberofdefects,provideimmediateshort-runfeedbackonthesuccessofquality-improvementefforts.Measures,suchascustomersatisfaction,canbeindicatorsoflong-runfutureperformance.Topic6:Evaluatingqualityperformance55AdvantagesofnonfinancialcosAnalyzenonfinancialinformationTopic6:Evaluatingqualityperformance56AnalyzenonfinancialinformatiComputerillustration3-1:

Cost-of-qualityreportWorkthroughthefollowingcomputerillustrationtocreateCOQreportsforamanufacturingandretailoperationandanalyzetheresults.Topic6:Evaluatingqualityperformance57Computerillustration3-1:

CoTopic5:CostsofdesignqualityLearningObjectiveExplainhowmanagersuseinformationaboutcostsofdesignquality.RequiredreadingChapter19,page542“TheLearning-and-GrowthPerspectiveforQualityImprovements”58Topic5:CostsofdesignqualiDesignqualityDesignqualityreferstohowcloselythecharacteristicsofaproductorservicemeettheneedsandwantsofcustomers.Designquality,then,involvesgivingcustomerswhattheydesireinaproductorservice.Topic5:Costsofdesignquality59DesignqualityDesignqualityrDesignqualityBecauseofthedifficultyinassigningcoststotheseareas,mostcompaniesdon’tmeasurethefinancialcostsofdesignquality.Thesecostsarereflectedtosomeextentinnonfinancialmeasures(thatis,mostlyintheinternal-businessprocessarea).Topic5:Costsofdesignquality60DesignqualityBecauseofthedTopic7:TimeandcompetitivenessLearningObjectiveExplaintheimpactoftimeonqualityandcompetitiveness.RequiredreadingChapter19,pages543-544,from“PartTwo:TimeasACompetitiveTool“upto“TimeDriversandCostsofTime”61Topic7:TimeandcompetitivenTimeandcompetitivenessCompetitivemarketsdemandshorternew-productdevelopmentandmorerapidresponsetocustomersRespondingefficientlytocustomers’needscanmakeafirm’sreputationFailuretorespondquicklycansendcustomerstothecompetition.Topic7:Timeandcompetitiveness62TimeandcompetitivenessCompetTimeandcompetitivenessTimeisanincreasinglyimportantstrategicfactor.Propertimemanagementcanincreaserevenuesanddecreasecosts.Inordertomanagetime,itmustbemeasuredproperly.Twooperationalmeasuresoftimearefrequentlyutilized:customer-responsetimeandon-timeperformance.Topic7:Timeandcompetitiveness63TimeandcompetitivenessTimeiCustomer-responsetime

Customer-responsetimeishowlongittakesfromthetimeacustomerplacesanorderforaproductorservicetothetimetheproductorserviceisdeliveredtothecustomer.Topic7:Timeandcompetitiveness64Customer-responsetimeCustomeCustomer-responsetime

Componentsofcustomer-responsetimeinclude:Receipttimeishowlongittakesmarketingtospecifytomanufacturingtheexactrequirementsofthecustomerorder.Manufacturingcycletime(alsocalledmanufacturingleadtime)ishowlongittakesfromreceiptoftheorderbymanufacturingtothetimethefinishedgoodisproduced.Deliverytimeishowlongittakestodeliveracompletedordertoacustomer.Topic7:Timeandcompetitiveness65Customer-responsetimeComponeCustomer-responsetime

Topic7:TimeandcompetitivenessCustomerplacesorderOrderissetupProductionstartedOrder

isdeliveredManufacturingcycle(lead)timeCustomer-responsetimeOrderisproducedReceipttime

DeliverytimeOrderReceivedbymanufacturingWaitingtime

Manufacturingtime

66Customer-responsetimeTopic7Activity-BasedManagementtoImproveCustomerResponseTimeABMhelpsimprovecustomerresponsetimebyidentifying:Activitiesthatconsumethemostresources,bothindollarsandtimeNon-value-addedactivitiesTopic8:Timedriversandcostsoftime67Activity-BasedManagementtoIOn-timeperformance

On-timeperformance

referstosituationsinwhichtheproductorserviceisactuallydeliveredatthetimeitisscheduledtobedelivered.On-timeperformanceincreasecustomersatisfaction.Topic7:TimeandcompetitivenessWealwaysarriveatthescheduledtimes!68On-timeperformanceOn-timepeTimeandcompetitivenessKnowingcustomers’needswithrespecttotimeisimportantinknowinghowtocapitalizeontimeasacompetitivenesstool.Managingthetwomeasuresoftime(customer-responsetimeandon-timeperformance)requiresunderstandingthecausesandcostsofdelays.Topic7:Timeandcompetitiveness69TimeandcompetitivenessKnowinTopic8:

Timedriversandcostsof

timeLearningObjectiveAnalyzerelevantrevenuesandcostsoftime.RequiredreadingChapter19,pages544-548,from“TimeDriversandCostsofTime”upto“Partthree:….”70Topic8:TimedriversandcostTimedriverAtimedriverisanyfactorthatcausesachangeinthespeedofanactivitywhenthefactorchanges.Twokeytimedriversuncertaintyabouttimingofcustomerorders,andbottlenecks.Companiesoftenaddressthesefactorsthroughplantorproductdesign,andproductionschedulingTopic8:Timedriversandcostsoftime71TimedriverAtimedriverisTimedriverUncertaintyaboutwhencustomerswillorderproductsorservicesisonetimedriver.Asordersarereceivedinamorerandomfashion,queuesformanddelaysoccurEventhoughacompanymaynotknowpreciselywhencustomerswilldemandtheproduct,theycanmakepredictionsandattempttominimizethewaittime.Topic8:Timedriversandcostsoftime72TimedriverUncertaintyaboutTimedriverThesecondtimedriverisbottlenecksduetolimitedcapacity.Abottleneckoccurswhentheworktobeperformedapproachesorexceedscapacityavailabletodoit.ThiswillsetthestageforthediscussionontheTheoryofConstraintslaterinthischapter.Topic8:Timedriversandcostsoftime73TimedriverThesecondtimedOthertimefactorsAveragewaitingtime

istheaveragetimeanorderwillwaitinlinebeforebeingprocessed.AnimportantfactorinproductionschedulingTopic8:TimedriversandcostsoftimeAveragewaitingtime=74OthertimefactorsAveragewaiSimpleTimePresumptionsWhendemanduncertaintyishigh,someunusedcapacityitdesirableIncreasingthecapacityofabottleneckresourcereducesmanufacturingleadtimesanddelaysReduceset-uptimesInvestinnewequipmenttoincreasecapacityCarefulschedulingofproductionTopic8:Timedriversandcostsoftime75SimpleTimePresumptionsWhendRelevantrevenuesandcostsoftimeInarelevantrevenueandcostanalysis,thetimefactormustbeconsideredasmanufacturingleadtimesandothertimefactorsmaybeimpactedbythedecision.Customerswilloftenpayahigherpriceforfasterdeliveryorservice,whilecarryingcosts(suchasinventory,rent,andwaste)areincreasedforslowerproductiontimes.Forthisreason,companiesswitchingtojust-in-timeoftenfindcostsavings.Whencapacityislimited,opportunitycostsbecomemoreimportant.Topic8:Timedriversandcostsoftime76RelevantrevenuesandcostsofTheBalancedScorecardandTime-RelatedMeasuresFinancialMeasuresRevenuelossesorpricediscountsattributabletodelaysCarryingcostsofinventoriesThroughputcontributionminusoperatingcostsCustomerMeasur