Picture opening your sale-preparation folder and finding a production report with one reassuring total. Before rehearsing the explanation, try a small challenge: could you take another person from that total back to the work it represents? Here is a fictional exercise for practising that conversation.
BDC includes rework caused by poor quality among forms of waste. That gives us a useful starting question: what work sits behind the finished number?
Name the work
ASQ describes rework as correcting defective material or errors; its scrap category concerns material or product that cannot be repaired, used or sold.
ASQ’s glossary defines first-pass yield around units meeting quality requirements without scrap, rerun, retest, return or offline repair.
Work through two closed batches
Fictional batches: 1,000 unique units each, same product, process and acceptance rule. No opening or closing work-in-progress. One final path per unit; rework succeeds once; scrap never reworked.
A: 900 first-pass + 80 recovered + 20 scrap = 1,000.
B: 800 first-pass + 180 recovered + 20 scrap = 1,000.
First-pass yield: A, 900/1,000 = 90%; B, 800/1,000 = 80%. Difference: 10 percentage points.
Both finish with 980 acceptable units. Recovered output does not enter the first-pass numerator.
Cost a defined task
BDC advises naming the cost object and assessing feasible tracing or allocation; indirect-cost allocation can be complex and error-prone.
Our object is additional rework labour and material only. Assume 0.25 extra hours and C$2 additional material per reworked unit, with labour costed at C$40/hour.
A: 80 × 0.25 = 20 hours; 20 × C$40 = C$800; 80 × C$2 = C$160; subtotal C$960.
B: 180 × 0.25 = 45 hours; 45 × C$40 = C$1,800; 180 × C$2 = C$360; subtotal C$2,160.
C$2,160 − C$960 = C$1,200. B uses 25 more hours.
Excluded: base production, scrap valuation/disposal/salvage, overhead, inspection/appraisal, prevention and other work. This is not an overhead policy, avoided payroll, cash savings or an EBITDA add-back.
To check the subtraction, work backwards: C$960 + C$1,200 = C$2,160. Then check the two components separately: C$1,800 − C$800 = C$1,000, and C$360 − C$160 = C$200. The two differences add to C$1,200. This is another route through the same stipulated arithmetic, not a second amount to add to the first.
Quality spending has different purposes
ASQ groups quality costs into prevention, appraisal, internal failure before customer receipt, and external failure discovered by customers. Prevention and appraisal are not automatically failures or waste.
Fill the record before designing the slide
ASQ’s check-sheet guidance calls for clear operational definitions, a collection period, labelled fields and a short trial. The record below is our original preparation exercise, not its template or an audit standard.
Here is a filled fictional B-01 entry. RULE-01 v1 is the rule used in this exercise; the document names are invented references, not downloadable forms. Maya is the fictional operations lead. Nothing needs to be submitted to Deal Flow Canada.
INPUT-B01: 1,000 unique units; RULE-01 v1; closed-batch cutoff.
CHECK-B01: 800 first-pass; 180 recovered; 20 scrap.
TIME-B01: 45 additional hours; assumed rate C$40/hour.
MAT-B01: C$360 additional material; combined subtotal C$2,160.
Keep the exclusions; check for inclusion elsewhere before combining records. No expense is removed from the accounts.
Try the handoff with the fictional references on four separate sheets. Put INPUT-B01 and CHECK-B01 side by side; place TIME-B01 and MAT-B01 underneath. Cover the final subtotal and ask a second reader to reconstruct it. Give them space to write their calculation, rather than asking only whether your answer looks right.
If the second reader cannot find something, add a precise note to your working version: the reference they wanted, where they expected it and who will supply it. Avoid turning the note into a vague request to improve documentation. In this exercise, Maya is the person responsible for the next answer.
Keep the unfinished case separate
C-01: 900 first-pass + 60 recovered + 20 scrap + 20 unresolved = 1,000. Known acceptable: 960; final acceptable output remains unknown.
Maya checks the outstanding records. When answers arrive, retain the earlier cutoff/version and create a later one. Do not silently replace the earlier snapshot.
Two counting traps and one comparison limit
For the characteristics considered, two defects in one unit mean one defective unit.
Two rework events still mean one entering unit; use actual event time, not the one-loop assumption.
Different products, processes or rules invalidate this comparison.
Before taking your own page into a sale discussion, practise a short introduction: “Here is the exercise I prepared. Here are the inputs I used. Here is the question I still need help answering.” Bring the working pages, not just a clean final slide. Ask your adviser which part of the explanation needs more work for your circumstances.
For general information and education, not legal, tax, investment or valuation advice. Examples are illustrative and do not predict your business’s value, financing terms or sale outcome. Consult qualified advisers about your situation.
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