Question:1

Large number of companies encourages quality as the main value to the customers and it is
considered as critical success factor in order to achieve competitiveness. The objective of
continuously improvements in programs not only fulfills the customers requirements but also
reduces the overall costs substantially. This target would be achieved on seriously focusing on
quality where costs associated substantially. This is only possible when during achieving the
quality the costs should be reduced.
The labor costs for quality is consider to be zero because the labor costs are pre-decided and the
quality improves with the employee experience and control over work. The efficiency in
machinery and working environment would also affect considerably.

Question 2: What is Depreciation? What determines which method you choose?

Answer: Depreciation is way of allocation of cost of fixed asset over the useful life of fixed
asset. Building, vehicles, machinery and equipments are few examples of fixed assets which
depreciate over the passage of time (investopedia, n.d.). For example cost of machinery is $
5,000 and its useful life is 5 years. Then through simple depreciation method called straight line
method, cost of asset is divided with useful life i.e. $5,000/5. In this way, $1,000 is charged as
depreciation expense in income statement of each year for five years. There are basic four types
of methods;
1. Straight Line Depreciation in which equal amount of depreciation is charged over the
useful life of asset as explained above. It is used where it is difficult to find out the
pattern of economic benefits of assets. Moreover, it is used for assets which give same
level of economic benefits throughout their useful life like buildings
(accountingexplained, n.d.).
2. Reducing Balance Depreciation in which depreciation expense reduces at same rate and
more depreciation are charged during beginning of life and less is charged during end of
life of asset. It is useful in case of assets in which economic benefits declines over its
useful life like IT equipment (accountingcoach, 2014) .
3. Sum of the Year' Digits Depreciation in which depreciation decreases by a constant
amount as the life of the asset progresses. It is used for assets which are assumed to be
more productive when they are new and with passage of time their productivity decreases
their productivity decreases as they become old like machinery (accountingexplained,
n.d.).
4. Units of Activity Depreciation in which depreciation expense differs over useful life of
asset and it depends on change in level of activity. When more units produce then more

depreciation charge and vice versa. This method is useful for assets which depreciate
with level of activity and not with passage of time i.e. more activity, more usage of asset
and more depreciation expense (accounting-simplified, n.d.).

Bibliography
accountingcoach. (2014). What is depreciation? Retrieved November 21, 2014, from
http://www.accountingcoach.com/blog/what-is-depreciation
accountingexplained. (n.d.). Sum of the Years' Digits Method of Depreciation.
Retrieved November 21, 2014, from
http://accountingexplained.com/financial/non-current-assets/syddepreciation-method
accounting-simplified.com. (n.d.). Methods of Depreciation. Retrieved November 21,
2014, from http://accounting-simplified.com/financial/fixedassets/depreciation-methods/types.html
investopedia. (n.d.). Types Of Depreciation. Retrieved November 20, 2014, from
http://www.investopedia.com/walkthrough/corporatefinance/2/depreciation/types-depreciation.aspx