Question

In its advertising, Ford Motor Company says "Quality is Job One." Ford is indicating that good quality is the most important consideration for its customers. This would include customer satisfaction on delivery dates and specific areas of car performance, including properly closing doors, and defect rates. Explain how Activity Based Costing can help supply this information to Ford's management.

Please answer in short essay format. 3-4 sentences needed.

Answer 1

Answer:

Ford Motor Company can review its list of activity centers and should ensure all quality related activities are defined and included in its ABC system and implemented.

The performance report of quality related activity centers which has more than normal level activities related to rework (due internal failure and external failure) will provide Ford's management the required information. For example if the activities center reworking on complaints related to doors not properly closing shows higher number of correctional activities, drivers and related cost, management should monitor the same and take appropriate action.