A CALCULATION OF COST OF QUALITY WITH ACTIVITY BASED COSTING METHOD TO MAINTAIN QUALITY BETWEEN PRODUCTION PROCESSES

Quality is an image of a company. PT Berkat Manunggal Jaya is a company that its primary activity is to assemble the generator units. This company wants to improve its quality in its production processes. The Initial stage is to determine the amount of quality cost since that it hasn’t been measured yet, especially in the production processes. This is because there are several cost categories that are within the company but the company still has not been able to measure them, which include the cost of diesel fuel for repeated inspection and the amount of diesel fuel that was carried when generators are delivered to the customers. The measuring method of this quality cost is using the Cost of Quality (COQ) model which details of the cost categories are based on Activity Based Costing (ABC) method. This method is suitable because it uses direct costs’ account, for instance, the use of materials as well as indirect costs as corporate overhead costs. The detail work instructions for the inspection of the production process between departments are provided based on existing procedures in the company. This is done to reduce the unacceptable product-in-progress when the production process is in operation. After calculating and put in all the activities into the four categories of Cost of Quality, the total Cost of Quality compared with the prices of sold unit from every generator set type are 1.77% for 680 KVA type open, 1.74% for 1300 KVA first type silent, 1.74% for 1300 KVA second type silent, 2.86% for 680 KVA type silent, 1.28% for 1300 KVA first type open, 1.27% for 1300 KVA second type open, 1.13% for 1740 KVA first type open, 1.13% for 1740 KVA second type open. The recommended solution for the reduction of Cost of Quality is to modify the procedure inspection flow in the company to reduce failure cost, especially in the final inspection costs (repeated test load processes).


Introduction
If only after receiving an order from customers the company started to produce products, then this company is categorized as a make-to-order company (Gasperz, 2002a:8). The company named PT Berkat Manunggal Jaya as the case study is a generator set assembling company that belongs to this category. The main production process is to assembly radiators, engines, and generators.
Based on the interview there are internal failures that usually happen mainly because of reworks and repeated test load processes, when the result is below the standard, then causing less optimal fuel consumption. Besides that, there is also a fuel that can't be completely drained from the fuel tank, especially for the generator sets silent type. In this company the prevention activities haven't been converted to cost whereas this activity is included in the cost of a quality category (Gaperz, 2002b:169). This cost can increase the production cost, so the company should understand the details of every activity to maintain product quality in balance with the cost.
When conducting observation especially to silent type generators, the company hasn't recorded the fuel usage, for example when the unit is experiencing overheating during the load test process. Another loss is when the fuel can't be drained completely from the tank, as it can be seen in picture 1 below, about the amount of fuel that still inside the fuel tank when the generator sets delivered. Besides that, there are other losses caused by increasing consumption fuel because of reinspection testing in the test load process. The using of fuel for generator sets from January until August 2014 can be seen in picture 2 below.

Picture 2. The Fuel Usage for Repeated Test Load
Process from January until Agustus 2014 Graph From this increasing consumption of fuel will affect the total of cost of quality, when detailing the category in the cost of quality, there will be known the caused of the loss in the production process, the company will know the total of cost of quality.
After that company can optimize the cost for every activity in the working procedure, so the productivity will increase based on the Deming chain method about to maintain quality in production, because the final result that the company wants, based on Kaizen method is a continuous improvement (Gaspersz, 2002b:157).

Literature Study A. Definition of Quality
There is three definitions of quality: 1. Definition of quality from Assauri Sofjan is factors from things that can make things become the purpose of people (Assauri, 1993:121). 2. Definition of quality from Vincent Gaspersz is a specialty from the product which is direct or indirect that can satisfy the user of the product and free from defect (Gaspersz, 2002b:5).
3. Definition of quality from A.V. Feigenbaum is a combining characteristics of products or services from marketing, making, and maintaining to full fill the purpose of the customer (Feigenbaum, 1992:7 (Gaspersz, 2002b:169).

C. Cost of Quality Measurement Model
Various methods for calculating the cost of quality are: 1. P-A-F P-A-F conventional model was published by Juran (1951) dan Feigenbaum (1956 to classify the cost of quality into prevention, appraisal, and failure cost. The  basic suppositions of the P-A-F model are that investment in prevention and appraisal activities will reduce failure costs and that further investment in prevention activities will reduce appraisal costs. 2. Crosby Crosby sees quality as "conformance to requirements" and therefore, defines the CoQ as the sum of the price of conformance (PoC) and price of non-conformance (PoNC). The price of conformance is the cost involved in making certain that things are done right the first time, which includes actual prevention and appraisal costs, and the price of nonconformance is the money wasted when work fails to conform to customer requirements.

Opportunity or Intangible
The role of intangible cost within the overall quality cost scheme. In general, intangible costs are costs that can be only estimated such as profits not earned because of lost customers and reduction in revenue owing to non-conformance.

Process Cost Method
The process cost is the total of the cost of conformance (CoC) and the cost of nonconformance (CoNC) for a particular process. The CoC is the actual process cost of providing products or services to the required standards, first time and every time, by a given specified process. The CoNC is the failure cost associated with a process not being operated to the required standard [7]. According to this definition, we know that the content of this categorization (CoC and CoNC) is different from that of Crosby's (PoC and PoNC) mentioned previously.
The use of a process cost model is suggested as a preferred method for quality costing within TQM as it recognizes the importance of process cost measurement and ownership and presents a more integrated approach to quality than a P-A-F model.

Activity Based Costing (ABC)
These deficiencies could be overcome under activity-based costing (ABC) developed by Cooper and Kaplan of Harvard Business School. ABC uses the two-stage procedure to achieve the accurate costs of various cost objects (such as departments, products, customers, and channels), tracing resource costs (including overhead costs) to activities, and then tracing the costs of activities to cost objects. ABC uses the two-stage procedure to achieve the accurate costs of various cost objects (such as departments, products, customers, and channels), tracing resource costs (including overhead costs) to activities, and then tracing the costs of activities to cost objects. (Vaxevanidis, 2008).

Materials and Methods a. Preliminary Studies
Preliminary studies are an observation, interviewing and literature studying process that has been doing to known the condition of the object.

b. Literature Studies
At this stage, the study of the literature that is considered relevant to the research. Various sources are used, among others, regarding the calculation of Cost of Quality by Activity Based Costing sourced from books and research journals.

c. Production Floor Observe
At this stage, the process of observation and interviews with relevant person to obtain information as possible about the processes and activities in company included into four main categories of the COQ, so that the process of identification when processing the data to calculating the cost of quality based on the literature study of cost of Quality and by using Activity Based Costing method.

d. Problem Identification
Based on the background of the loss amount of fuel that can not be measured due to the repetition test load and the amount of fuel that can't be drawn when the product is delivered to the customer. Formulation of the problem to be studied in this research is the calculation of the cost of a loss in the event of failure of quality using calculation of Cost of Quality by Activity Based Costing, so the results of this study can be used as a recommendation for PT Thanks Manunggal Jaya to be implemented at the Department of Technical Support. Besides, with the emergence of some product rework that occurs in the sequence between the production process, companies need to improve the way the product quality inspection, so that the necessary flow of work procedures between inspection departments on every process of production.

e. Research Objectives
Based on the problems that have been formulated, the objectives of this research are: 1. For example, is the waste from material that can't be used again in the production process.  Rework For example are the salary for department staff that doing the rework, material cost, and operational cost for the rework process The process of data collection is identifying the whole process that occurs within the company according to the four categories of Cost of Quality because all activities associated with the Cost of Quality if it raises the cost will affect the value of the calculation. Identification of process activities Cost of Quality in companies that have the potential of generating costs, there are:  Failure Analysis For example, is the salary for technical support department staff and engineering department staff.

 Reinspection and Testing
For example, is the salary for quality assurance staff and total fuel for repeating the test load process.  Avoidable process losses For example a calculation for fuel that can't be drawn from the fuel tank after finish final inspection.

d. Failure of External Cost
 Warranty For example, is value after a unit has been sold. e. Inspection Procedure Inspection Procedure is a usual inspection that the company has been doing until now, this inspection is done by the quality assurance department.

h. Data Processing
At this stage of the processing of the data collected from the previous stage, the data will be processed with the calculation of Cost of Quality and using Activity Based Costing method, the four categories of costs in the Cost of Quality will be described with a detailed cost according to activity because such costs arise. Then the data will be processed shaped like a report calculating the cost of quality companies. While the details of the procedure for the preparation of quality inspection is done by lowering the existing procedures become more detailed and elaborate, in the form of inspection workflow procedures.

i. Analysis and Recommendation
At this stage contains the analysis of the data processing, that has been analyzed to be evaluated and determined in the calculation process which gave rise to the category of the largest costs of reporting Cost of Quality that, in addition to prevent failures in the production process will be made details of the flow of work procedures inspection so that the recommendations are made regarding the calculation of the cost of quality for the company so that can be seen in the activity which causes increasing of the quality costs and details of the workflow procedures for quality inspection should be carried out during the production process.

Results and Discussion a. Calculating Cost of Quality
Cost of quality is combining four categories, for example calculating the cost of quality one type of generator sets that have been produced can be seen in table 1 below.

b. Detailed Inspection Procedures
Detailed inspection procedures are made to minimize failure. This modification procedure is based on the company doing in inspection, the modification procedure can be seen below in picture 3 until picture 6. comparation between the cost of quality and the value of sales is 1,17%.

8)
For the second type 1740 KVA open the cost of quality is Rp 29,863,236.51. The percentage comparison between the cost of quality and the value of sales is 1,17%. c. The modification details of inspection procedures are : 1) Inspection procedure for incoming materials Inspection material in the supplier process and detail about the material flow to the warehouse after the inspection process should be added to the procedure.

2) Inspection procedure for production in process
Second decision process about separating good work in process product and defect work in process product should be added to the procedure.

3) Inspection procedure for the final product
Pre Delivery Inspection process should be added to the procedure to assure the identity of the product.