M, a manufacturing company, has had some problems with defects in one of the main products it produces. This product has been made by the company for…

The company needs controls that both reduce defects and increase profitability. This requires focusing on preventative and efficient detective controls that lower the total 'cost of quality'.

(D) Servicing machinery is a preventative control. It addresses a likely root cause of defects, reducing scrap, rework, and warranty costs. This directly prevents defects and improves profitability by lowering failure costs and avoiding downtime.

(B) Formalising quality checks is a detective control. It creates accountability and a formal record of inspections. By catching defects internally, it reduces the much higher external failure costs (e.g., customer returns, reputational damage), thus protecting profitability.

(E) Checking employee qualifications is a preventative control. It ensures that staff have the necessary competence to perform their roles correctly, which is fundamental to building quality into the process and preventing errors that lead to costly defects.

A. Increasing quality control staff is a costly, reactive measure. It increases appraisal costs (salaries) without addressing the root cause of defects, thus likely decreasing overall profitability.

C. Using a director for routine inspections is an inefficient and expensive use of a senior resource. This would significantly increase costs and negatively impact profitability.

1. Drury, C. (2018). Management and Cost Accounting (10th ed.). Cengage Learning.

Chapter 20 discusses the costs of quality, categorizing them into prevention, appraisal, internal failure, and external failure costs. The text explains that investing in prevention costs (e.g., machine maintenance - Option D, and employee training/verification - Option E) and appraisal costs (e.g., inspection - Option B) is a primary strategy to reduce the much larger internal and external failure costs, thereby improving overall profitability. (See sections on 'Prevention costs' and 'Appraisal costs').

2. Slack, N., Brandon-Jones, A., & Johnston, R. (2016). Operations Management (8th ed.). Pearson Education.

Chapter 17, "Quality Management," details the principle of Total Quality Management (TQM), which emphasizes preventing defects rather than inspecting for them. It highlights preventative maintenance (Option D) as a key activity to ensure process capability. It also describes inspection (Option B) as a way to contain errors and prevent defective products from reaching the customer, which is crucial for managing costs and reputation. The importance of skilled and capable staff (Option E) is a foundational element of TQM.

3. MIT OpenCourseWare. (2004). 15.762J Supply Chain Planning, Lecture 11: Quality Management. Massachusetts Institute of Technology.

The lecture notes differentiate between the "Cost of Control" (prevention and appraisal) and the "Cost of Failure of Control." The core concept presented is that strategic investment in controls like process maintenance (Option D), employee competence (Option E), and systematic inspection (Option B) reduces the total cost of quality, leading to higher profitability. The notes explicitly contrast this with inefficient approaches like simply adding more inspectors (similar to Option A). (Available at: ocw.mit.edu)