Assignment -01

Course Title: Total Quality Management

Course Code:EMIS-541
Semester: Summer 2021
Department: Management Information System

Submitted by
Maisha Anzum
Id:6194235053

Submitted to
Md. Rakibul Hasan
Management Information System
Case study on Tata Motor
1 ) What is the difference between cost cutting and cost erosion?
The main differences between Cost Control and Cost Reduction:

Cost Control Cost Reduction

1) Cost Control focuses on decreasing the total 1) cost reduction focuses on decreasing per unit
cost of production cost of a product.

2) Cost Control is a temporary process in nature 2) Cost Reduction which is a permanent process.

3) The process of cost control will be completed 3) The process of cost reduction is a continuous
when the specified target is achieved. process. It has no visible end. It targets for
eliminating wasteful expenses.

4) Cost Control does not guarantee quality 4) Cost reduction assured 100% quality
maintenance of products. maintenance.

5) Cost Control is a preventive function because 5) Cost Reduction is a corrective function.

it ascertains the cost before its occurrence
2) Which were the four specific areas, identified by Prakash Telang as part of the cost erosion
initiatives?
Prakash M. Telang, senior vice president (manufacturing), was designated the “cost-erosion champion”
and put in charge of the entire initiative. He identified the four areas that include direct material costs,
variable conversion costs, fixed costs, and financial restructuring.
Direct material costs are the costs that are used directly in producing goods and constituted about 65
percent of all the costs. Variable conversion costs are the direct labor that are incurred when products are
being transferred from inventory into finished products and include power, fuel, and tools, among others.
Fixed costs are the business costs that are incurred by the firm and are costs that do not change in the long
run and include labor, marketing, research and development, and corporate expenses. The last area is on
financial restructuring and is the process of reshuffling the financial structure of the firm and comprises
the balance sheet, working capital, and debt restructuring.
3) What were the benefits accruing to Tata Motors on implementing the cost-erosion exercise and
the quality management project?
Tata implemented cost erosion exercise and benefitted by reducing the level of losses in the firm.
Therefore, by Tata lowering costs, it can meet its goals in the long run and pay off its obligations. Losses
cause harm to the company, and thus reducing losses through cost erosion facilitates its growth. Quality
management projects, however, helps the company create a competitive position in the Indian market and
allows it to adapt to the ever-changing and emerging market. Through cost erosion and quality
management running concurrently in the organization, it has improved the profit margins and created a
foreseeable future. Total quality management facilitates higher productivity and profitability and reduces
waste and defects in a company.
Exercise 1:

Product A ,
Total cost = Prevention+ Appraisal+ Internal Failure+ External Failure+ Total Labour cost
= 5698+37676+119107+133168+5800
= 301449
No of Machine = 71
Total Cost 301449
Cost per Machine = = =4245.7605
No of Machine 71
Total Sale 8165000
Return on Sale = = =27.085842
Total Cost 301449
Product B,
Total cost = Prevention+ Appraisal+ Internal Failure+ External Failure+ Total Labour cost
= 1569+10384+60876+12625+5650
= 91104
No of Machine = 14
Total Cost 91104
Cost per Machine = = =6507.429
No of Machine 14
Total Sale 1750000
Return on Sale = = =19.20882
Total Cost 91104
Product C,
Total cost = Prevention+ Appraisal+ Internal Failure+ External Failure + Total Labour cost
= 1908+9206+63523+15755+4585
= 94977
No of Machine = 14
Total Cost 9 4977
Cost per Machine = = =6 784.041
No of Machine 14
Total Sale 90392
Return on Sale = = =0.951725
Total Cost 94977
Product A achieves the maximum return on sales and Product C achieves the lowest return. Therefore,
Product C is the worst producer and Product A is the highest scorer.
Exercise

a. How much was spent on external failure costs?

Ans: External failure costs-10000(customer returns)

b. How much was spent on internal failure costs?

Ans: Internal failure costs-20000(In-house scrap and rework)

c. How much was spent on failure costs?

Ans: Failure costs = (External failure costs-customer returns)+ (Internal failure costs In-house
scrap and rework)= 30000

d. How much was spent on appraisal costs?

Ans: Appraisal costs=40000 (inspection and tests)
e. How much was spent on preventive costs?
Ans: Preventive costs=60000+30000=90000(Design review+ Excess Inventory)

f. What were the total quality costs of ABC Company for the month?
Ans: Total cost = Prevention+ Appraisal+ Internal Failure+ External Failure
=90000+40000+20000+10000
=160000