Learning objective
Explain costs and benefits of maintaining quality, including sales, reputation, price, inspection, training and recalls.
Read the explanation, check the common trap, then practise with flashcards and questions.
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Topic
The concept of quality
Subtopic
Maintaining quality
Study support
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Quick explanation
Explain costs and benefits of maintaining quality, including sales, reputation, price, inspection, training and recalls
- This point belongs to The concept of quality, especially Maintaining quality.
- You need to be able to explain costs and benefits of maintaining quality, including sales, reputation, price, inspection, training and recalls.
- The key ideas to know are reputation.
- Use the linked flashcards and practice questions to check recall, then practise applying the idea in an exam-style answer.
Key concepts
Why it matters
This objective helps connect Maintaining quality to exam-style questions, flashcards, and revision notes for The concept of quality.
Quick student answer
A small manufacturer produces 500 units of a product. The variable cost per unit is £20, fixed cost is £5,000, and the selling price per unit is £50. Calculate the profit and explain how maintaining quality could affect this profit.
Direct answer
Profit = £10,000. Maintaining quality could increase the selling price or reduce defect rates, thereby raising revenue or lowering costs and improving profit.
How it works
Total variable cost = 500 × £20 = £10,000. Total cost = £10,000 + £5,000 = £15,000. Revenue = 500 × £50 = £25,000. Profit = £25,000 – £15,000 = £10,000. If quality is improved, the company might charge a higher price or reduce returns, which would increase revenue or reduce costs, leading to a higher profit.
Key terms
- Reputation: Reputation is the overall perception of a business’s reliability, quality and trustworthiness held by customers, suppliers and other stakeholders.
Common trap
Mixing up variable and fixed costs: Variable costs change with the level of production (e.g., raw materials), while fixed costs remain constant regardless of output (e.g., rent).
Related questions
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Revision notestopic notes
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Open revision notesRelated learning objectives
- Explain customer expectations of quality in goods and services.
Quality expectations and problems
- Explain how businesses identify and measure quality problems.
Quality expectations and problems
- Explain consequences of quality issues for a business.
Quality expectations and problems
- Explain methods of maintaining consistent quality, including total quality management.
Maintaining quality
- Identify advantages to a business of using total quality management.
Maintaining quality