Quality costing is similar in service and manufacturing organizations. Nevertheless, the differences between these organizations have certain implications for quality management. Thus,
- Direct labor costs are usually a higher percentage of total costs in manufacturing organizations.
- External failure costs are relatively greater in service organizations.
- Quality improvements resulting in more efficient use of labor time are more likely to be accepted by employees in service organizations.
- Poor service is less likely to result in loss of customers than a faulty product.
Answer(s): B
Explanation:
External failure costs arise when problems occur after delivery. They occur because products or services are nonconforming or otherwise do not satisfy customers. External failure costs in service enterprises are even more important than in manufacturing environments. Faulty goods sometimes maybe reworked or replaced to a customer's satisfaction, but poor service tends to result in a loss of customers.