Page 6 - CIMA OCS August 2018 Day 1 Suggested Solutions

CIMA AUGUST 2018 – OPERATIONAL CASE STUDY

Exercise 1(c) - Quality Costing

Type of cost How it could apply to Thomas Fine Teas

Prevention Costs • Choice of suppliers for key raw materials – especially tea
• Purchasing better quality blending and bagging equipment in the first
place to ensure consistency and quality of output
• Ensuring all production staff are highly trained
• Regular maintenance of equipment and replacement of key items before
they become problematic

Appraisal Costs Thomas Fine Teas does a number quality inspections
• Tea leaves are sampled before purchase
• Each consignment is taste tested on receipt to the warehouse
• Blends tasted as created
• Leaves requisitioned for each batch are checked before blending
• Sample taken from blended leaves and checked by blenders before put
into tea bags

Internal Failure • Cost of tea leaves rejected upon arrival
Costs • Cost of sub-standard blends – we are not told whether these are disposed
of or sold separately.

External Failure • Given the competitive nature of the industry and the market positioning
Costs strategy of Thomas Fine Teas, it is vital that tea bags arrive in prime
condition into store (e.g. packaging not damaged, no inconsistencies due
to poor quality control)
• Poor quality is most likely to result in lost customers
• In the longer run poor quality could damage the Thomas Fine Teas brand
and undermine the business model.

48 KAPLAN PUBLISHING