12 markseasy
(b)
Define ‘quality assurance’.
Business
14 questions · 80 marks · ≈ 1 hours
Define ‘quality assurance’.
Outline one advantage and one disadvantage to SWB of using quality control.
[case-study] SWB is in the secondary sector. It produces 150 000 wooden bookcases each week using batch production. SWB sells all its output to one customer. Quality control is important. SWB has 240 employees, of which 100 are part-time workers. SWB’s managers use noticeboards around the factory and meetings with employees every month to help reduce communication barriers. The Operations Manager is considering introducing just-in-time inventory control to reduce the amount of waste.
Outline two advantages to WLT of using quality assurance.
[case-study] WLT manufactures carpets. It exports 40% of its products. Globalisation has created opportunities and threats for WLT. Its method of production allows WLT to use specialisation. All of its 60 employees understand that quality assurance is important. WLT’s directors are considering the best way to increase efficiency.
State two factors that affect customer perceptions of quality.
Identify two disadvantages of using a system of quality assurance.
Define 'Total Quality Management (TQM)'.
Identify two risks to a business of failing to maintain quality.
Explain one advantage and one disadvantage to SSG of using quality control.
[case-study] SSG manufactures mobile (cell) phones using batch production. Quality control is important. SSG has 130 employees who all receive on-the-job training. The Marketing Manager is analysing cost and output data for product X. An extract is shown in the below table. As product X is in the maturity stage of the product life cycle SSG is considering possible extension strategies.
Extract from SSG’s cost and output data for product X Rent and other expenses per month $300 000 Variable cost per unit $80 Output per month 12 000
Explain four reasons why quality is important to a business.
Do you think quality control is the best method for a manufacturing business to use to achieve quality production? Justify your answer.
Explain two problems that low quality might cause Izaak’s business.
[case-study] Izaak owns a small fish restaurant. He employs two chefs (cooks) and three workers who serve in the restaurant.
Izaak has been trying to increase added value to improve profits. Izaak has been looking at the financial performance of his business. An extract is shown in the below table Izaak has received a number of complaints about food and service. He knows he must improve quality but cannot decide on the best way to do this.
Extract from income statements ($000)
Last year Current year Revenue X 300 Cost of sales 180 150 Gross profit 120 150 Expenses 90 Y Profit 30 15
Extract:
Protective Hats (PH)
PH is a large public limited company based in country Z. It has been operating successfully for 50 years. PH produces a range of protective hats for employees working on construction sites, in factories or mines. It has a reputation for producing high-quality products and sells its hats around the world.
PH is currently the market leader in country Z. To remain competitive PH regularly carries out market research to find out if new products are needed. PH needs to ensure its market research data is accurate, so that it can develop the best new protective hats.
PH’s only factory is in country Z. It has 100 production employees. They work on a flow production line and carry out the same tasks every day. PH pays these employees the minimum wage and there have been complaints about working conditions. Some of the employees are considering becoming members of a trade union.
PH’s directors plan to expand the company by opening factories in other countries to produce protective hats. They think there are many benefits for PH of becoming a multinational company. They are aware that there is growing demand for protective hats in many developing countries where construction and manufacturing industries are expected to continue to have strong growth in the next 10 years.
{align=center} Appendix 1
{align=center} Advertisement for PH’s products
{align=center} PH’s protective hats will protect your employees when at work.
{align=center} We supply many of the leading construction, manufacturing and mining companies across the world.
{align=center} High quality is guaranteed.
{align=center} PH’s hats can be ordered online from our website.
{align=center} Appendix 2
{align=center} Email to PH’s Managing Director from PH’s Human Resources Director
To: Managing Director
From: Human Resources Director
Date: 1 October 2023
Re: Training
After reviewing our current training, I think we need to increase the training we provide to new employees. Existing employees would also benefit from additional training as there have been issues with motivation.
I know there are plans to introduce new equipment into the flow production line. When is this likely to happen?
Can we please meet to discuss these issues?
{align=center} Appendix 3
{align=center} PH’s financial data for 2021 and 2022
| 2021 | 2022 | |
|---|---|---|
| Revenue | $100m | $125m |
| Profit | $20m | $20m |
| Gross profit margin | 60% | 65% |
| Profit margin | 20% | 16% |
Consider the following two ways PH could ensure quality production.
Which way should PH choose? Justify your answer.
Refer to the following insert when answering the question.
Extract:
The BB Health Spa (BB)
Bethany owns The BB Health Spa in Main City in country X. Economic growth has been high for the last few years. The government of country X wants this growth to continue so it has reduced income tax. However, it is also worried about inflation becoming a problem so it has increased interest rates.
The BB Health Spa is very busy and Bethany is considering taking on a partner to help manage the business and give her more free time. However, she has been a sole trader for 10 years and wants the business to stay small.
The customers of The BB Health Spa are people of all ages who are interested in their health. Bethany employs two qualified workers to provide the treatments for customers. Bethany herself also provides customers with treatments. In addition, she does all the administration such as ordering inventory, accounts and paying invoices when the spa is closed.
The BB Health Spa still uses the original treatment equipment which was purchased when the business started. Some spas nearby have the latest equipment but these spas charge much higher prices than The BB Health Spa. Bethany records all the financial transactions by filling in accounts books by hand. This takes her a long time. Customers book appointments using the telephone and Bethany later telephones them to remind them when an appointment is due.
{align=center} Appendix 1
{align=center} Advert for treatments at The BB Health Spa
{align=center}
{align=center} Appendix 2
{align=center} Weekly forecasts for two possible additional services
| Steam room | Hair cuts | |
|---|---|---|
| Additional customers | 200 | 50 |
| Average price charged per customer | $5 | $25 |
| Wages | $60 | $400 |
| Cost of sales | $40 | $125 |
| Lease of equipment | $400 | $175 |
{align=center}
{align=center} Appendix 3
Daily News
{align=right} September
{align=center} New equipment now available in many health spas to make skin look younger
There have been a number of changes in technology for health spas which allow the treatments to be much more effective in making skin look younger. Many people are keen to try these treatments using the latest equipment to get younger looking skin. This equipment is very expensive for health spas to buy or lease.
The news of these treatments has appeared on social media sites and on mobile phone Apps leading to higher demand. ‘Some customers will pay high prices for such treatments’, said a local health spa owner who is keen to promote his health spa as being one of the first to use the new equipment.
There have also been developments in software which make customer bookings and accounts much easier, quicker and with fewer mistakes. Automatic text (sms) messages are used to remind customers of their appointments – so no need to miss an appointment again.
Look out for these changes in health spas near you!
State the advantages and disadvantages of the following three ways to achieve good quality service at the health spa:
Which do you think is the most important way? Justify your answer.
Refer to the following insert when answering the question.
Extract:
Cell Covers (CC)
Aisha worked for several years for a company that repairs mobile (cell) phones in country Z. She had always wanted to be her own boss and decided to leave her job to set up CC to produce covers for mobile phones. She went into partnership with her brother, Aruna. He worked as an Operations Manager for a company producing children’s clothes.
The sources of finance for the business were $10 000 of savings from each partner and a bank loan of $10 000. CC was also given a government grant to help the new business get started. CC leased a factory, bought some equipment and had to pay some expenses before the business had regular cash inflows.
CC’s current product is a range of standardised phone covers which are sold in the mass market. These are sold using a competitive pricing method through mobile phone shops. CC employs 10 skilled production workers who are paid just above the legal minimum wage. These workers have been trained how to operate the equipment and work as a team on the production line. During the production process there is a lot of waste plastic produced and CC sends this to landfill sites. The business has just completed its second year of trading.
CC is about to launch a new range of individual personalised phone covers. It will need to recruit 2 additional production workers. Aruna knows that the marketing mix for this new product may have to be different to the marketing mix used for the standardised products. The new product will be aimed at a niche market of high income consumers between the ages of 18 to 25. There are few other competitors in this market at present.
{align=center} Appendix 1
{align=center} Newspaper article in Main News
Country Z has been in a recession but the economy is now growing rapidly and unemployment is falling. With higher incomes the majority of people now own a mobile phone. This makes communication easier. Mobile banking is becoming more popular and it is used by a large percentage of the population.
{align=center} Appendix 2
{align=center} Advertisement for CC’s standardised mobile phone covers
Do you want to protect your phone from damage? Then buy a phone cover from CC. Your phone will never be damaged if you use one of our high quality covers!!
We offer a range of standardised covers at competitive prices. The CC range has many different colours and designs so you will stand out from the crowd.
{align=center} Appendix 3
{align=center} Summary of CC’s financial information from the end of the second year of trading ($)
| Revenue | 800 000 |
|---|---|
| Cost of sales | 400 000 |
| Gross profit | 400 000 |
| Expenses | 250 000 |
| Profit | 150 000 |
| Current Assets | 20 000 |
| of which: Inventory | 5 000 |
| Current liabilities | 15 000 |
Explain the benefits and limitations of the following two ways of achieving quality production.
Which way should CC use? Justify your answer.
Refer to the following insert when answering the question.