Question 1

The cost of statistical quality control in a product quality cost system is properly characterized as a(n):

Accepted Answer

A) External failure cost. 
B) Internal failure cost. 
C) Training cost. 
D) Opportunity cost. 
E) Appraisal cost. 
A) External failure cost. 
B) Internal failure cost. 
C) Training cost. 
D) Opportunity cost. 
E) Appraisal cost. E

Question 2

In a Cost of Quality (COQ) framework, warranty costs are properly classified as:

Accepted Answer

A) Prevention costs. 
B) Retention costs. 
C) Appraisal costs. 
D) Internal failure costs. 
E) External failure costs. 
A) Prevention costs. 
B) Retention costs. 
C) Appraisal costs. 
D) Internal failure costs. 
E) External failure costs. E

Question 3

Assume that based on the company's cost information, tolerance is set at 0.0009. What should the target specification ("target specs") for the product be?

Accepted Answer

A) 0.025 +/- 0.0300 
B) 0.025 +/- 0.0090 
C) 0.500 +/- 0.0300 
D) 0.500 +/- 0.0009 
E) 0.500 +/- 0.00000081 
A) 0.025 +/- 0.0300 
B) 0.025 +/- 0.0090 
C) 0.500 +/- 0.0300 
D) 0.500 +/- 0.0009 
E) 0.500 +/- 0.00000081 D

Question 4

In a Cost-of-Quality (COQ) reporting framework, costs incurred in conjunction with the measurement and analysis of data to ascertain conformity of products and services to specification are properly classified as:

Accepted Answer

A) External failure costs. 
B) Appraisal costs. 
C) Internal failure costs. 
D) Prevention costs. 
E) Value-added costs. 
A) External failure costs. 
B) Appraisal costs. 
C) Internal failure costs. 
D) Prevention costs. 
E) Value-added costs.

Question 5

Oslo Company's target quality characteristic, T, for one of its key components is set at 82. Using the Taguchi Loss Function the company has determined the cost coefficient, k, to be $6,000. What is the estimated loss, L(x), if the value of the quality characteristic, x, is 85?

Accepted Answer

A) $1,500. 
B) $4,500. 
C) $18,000. 
D) $42,500. 
E) $54,000. 
A) $1,500. 
B) $4,500. 
C) $18,000. 
D) $42,500. 
E) $54,000.

Question 6

Over the last few months, Ithaca Precision Instruments (IPI) obtained the following measurements on a key quality characteristic of its product:   The company's experience has been that a customer will reject a product that deviates from the target quality characteristic of 0.50 by more than 0.004. Each rejection costs the firm $5. Determine the expected loss of the observed quality characteristic for IPI. Round final steps of calculation to 4 decimal places .

Accepted Answer

A) $7.8125. 
B) $31.2500. 
C) $78.1250. 
D) $108.1250. 
E) $312.5000. 
A) $7.8125. 
B) $31.2500. 
C) $78.1250. 
D) $108.1250. 
E) $312.5000.

Question 7

Statistical quality control often involves the use of control charts, whose basic purpose is to:

Accepted Answer

A) Determine when accounting control procedures are not working. 
B) Control labor costs in production operations. 
C) Detect performance trends away from normal operations. 
D) Monitor internal administrative control applications in EDP (electronic data processing) operations. 
E) Control internal audit confirmation responses. 
A) Determine when accounting control procedures are not working. 
B) Control labor costs in production operations. 
C) Detect performance trends away from normal operations. 
D) Monitor internal administrative control applications in EDP (electronic data processing) operations. 
E) Control internal audit confirmation responses.

Question 8

Value stream costing attempts to do all of the following except:

Accepted Answer

A) Reduce the need for cost allocations. 
B) Increase tracing of direct costs to value streams. 
C) Identify and accumulate all value-stream costs. 
D) Eliminate the need for complex overhead allocation methods. 
A) Reduce the need for cost allocations. 
B) Increase tracing of direct costs to value streams. 
C) Identify and accumulate all value-stream costs. 
D) Eliminate the need for complex overhead allocation methods.

Question 9

A Cost-of-Quality (COQ) reporting format may be applicable to help support the sustainability goals of organizations. Indeed, the development of such a reporting framework would likely be viewed as a significant improvement to an organization's management accounting and control system.
Required:
1. Use your knowledge of COQ reporting to speculate on an "environmental assessment" reporting framework. This tool should identify each aspect of the organization's activities that affect the environment, in terms of both living and non-living natural systems (ecosystems), including land, water, and air. (That is, what are some of the environmental impacts that the management accounting system could assess and monitor?)
2. In the past, management accountants focused on a traditional approach to environmental risk management, wherein the focus was on ensuring regulatory compliance (EPA, etc.) in order to minimize fines, penalties, and legal costs). In today's business climate, however, more will likely be expected of the management accountant. What type of opportunities, associated with environmental performance, might the management accountant suggest to management?

Accepted Answer

Answer may vary
Feedback: No set solutio

Question 10

As noted in Chapter 17, one approach to setting quality standards is to use a Six Sigma approach.
Required:
1. What is meant by the term "Six Sigma"?
2. The overall process of implementing process-improvement projects is referred to as DMAIC (Define, Measure, Analyze, Improve, and Control). Provide an overview of each stage of the DMAIC specifically within the context of a Six Sigma implementation.

Accepted Answer

Answer may vary
Feedback:
1. The term Si

Question 11

Which of the following is not a likely consequence of improved product quality?

Accepted Answer

A) Increased sales returns. 
B) Decreased warranty repair costs. 
C) Reduced total manufacturing costs. 
D) Increased product selling prices. 
E) Reductions in rework costs. 
A) Increased sales returns. 
B) Decreased warranty repair costs. 
C) Reduced total manufacturing costs. 
D) Increased product selling prices. 
E) Reductions in rework costs.

Question 12

All of the following would generally be included in a Cost of Quality (COQ) report except:

Accepted Answer

A) Warranty claims. 
B) Design engineering. 
C) Direct materials cost. 
D) Supplier evaluations. 
E) Quality training. 
A) Warranty claims. 
B) Design engineering. 
C) Direct materials cost. 
D) Supplier evaluations. 
E) Quality training.

Question 13

Which of the following items is not a tool that can be used by management to detect poor quality in an operation?

Accepted Answer

A) Control chart. 
B) Run chart. 
C) Taguchi loss function. 
D) Statistical quality control (SQ
C)  chart. 
E) Statistical process control (SP
C)  chart. 
A) Control chart. 
B) Run chart. 
C) Taguchi loss function. 
D) Statistical quality control (SQ
C)  chart. 
E) Statistical process control (SP
C)  chart.

Question 14

Which one of the following is not a category of the Cost of Quality (COQ) reporting model?

Accepted Answer

A) Value-stream cost. 
B) External failure cost. 
C) Internal failure cost. 
D) Detection cost. 
E) Prevention cost. 
A) Value-stream cost. 
B) External failure cost. 
C) Internal failure cost. 
D) Detection cost. 
E) Prevention cost.

Question 15

For Cost of Quality (COQ) reporting purposes, materials inspection costs would be classified as:

Accepted Answer

A) Prevention costs. 
B) Retention costs. 
C) Appraisal costs. 
D) Internal failure costs. 
E) External failure costs. 
A) Prevention costs. 
B) Retention costs. 
C) Appraisal costs. 
D) Internal failure costs. 
E) External failure costs.

Question 16

Steel Inc. specializes in manufacturing ship doors. The blueprint specification for the thickness of a high-demand model calls for 0.9 ± 0.005 inch. It costs $800 to scrap a part that is outside of the specification. The thickness measure for the unit just completed is 0.85.
Required:
1. Calculate the value of k, the cost coefficient in the Taguchi loss function.
2. Calculate the estimated amount of loss for the unit, L(x) = 0.85.

Accepted Answer

Answer may vary
Feedback:
1. k = Total q

Question 17

Which of the following is a tool that indicates how frequently each type of quality defect occurs?

Accepted Answer

A) Control chart. 
B) Pareto diagram. 
C) Cause and effect diagram. 
D) Fishbone diagrams. 
E) Ishikawa diagram. 
A) Control chart. 
B) Pareto diagram. 
C) Cause and effect diagram. 
D) Fishbone diagrams. 
E) Ishikawa diagram.

Question 18

A proper role for accounting in terms of managing and controlling quality is all of the following except:

Accepted Answer

A) Providing management with relevant financial information for decisions related to quality-oriented initiatives. 
B) Providing management with relevant nonfinancial information for decisions related to quality-related initiatives. 
C) Specifying quality-related goals and objectives for the organization. 
D) Identifying operational constraints. 
E) Participating in the development of Six Sigma quality-related goals. 
A) Providing management with relevant financial information for decisions related to quality-oriented initiatives. 
B) Providing management with relevant nonfinancial information for decisions related to quality-related initiatives. 
C) Specifying quality-related goals and objectives for the organization. 
D) Identifying operational constraints. 
E) Participating in the development of Six Sigma quality-related goals.

Question 19

What is the amount of the estimated loss, L(x), using a Taguchi loss function, if the actual quality characteristic, x, is 0.41?

Accepted Answer

A) $25. 
B) $100. 
C) $10,000. 
D) $4,000,000. 
E) $4,100,000. 
A) $25. 
B) $100. 
C) $10,000. 
D) $4,000,000. 
E) $4,100,000.

Question 20

Six Sigma is one approach for setting quality expectations for a given process or output. As pointed out in your text, the term "Six Sigma" comes from statistics: in a normal distribution, the area (probability) outside of +/- six standard deviations from the mean value is exceedingly small. You are provided the following values from a standardized normal distribution .
   Note: The Z values in the above table refer to the number of sigmas to the right of center . The listed probabilities, p, refer to the area to the right of the chosen Z point, as illustrated by the graph below:   Required:
1. Given the above, what is the probability for a 1-sigma performance level? How many defects might we expect for a process that is operating at 1-sigma level?
2. Redo #1 above, but this time for a 3-sigma level. What is the percentage increase in quality expected under a 3-sigma performance level compared to a 1-sigma level?
3. Redo #1 above, but this time for a 4-sigma level. Also, what is the anticipated percentage improvement in quality when moving from a 3-sigma to a 4-sigma performance level?

Accepted Answer

Answer may vary
Feedback:
1. Area = 0.15

The cost of statistical quality control in a product quality cost system is properly characterized as a(n):

In a Cost of Quality (COQ) framework, warranty costs are properly classified as:

Assume that based on the company's cost information, tolerance is set at 0.0009. What should the target specification ("target specs") for the product be?

In a Cost-of-Quality (COQ) reporting framework, costs incurred in conjunction with the measurement and analysis of data to ascertain conformity of products and services to specification are properly classified as:

Oslo Company's target quality characteristic, T, for one of its key components is set at 82. Using the Taguchi Loss Function the company has determined the cost coefficient, k, to be $6,000. What is the estimated loss, L(x), if the value of the quality characteristic, x, is 85?

Statistical quality control often involves the use of control charts, whose basic purpose is to:

Value stream costing attempts to do all of the following except:

Which of the following is not a likely consequence of improved product quality?

All of the following would generally be included in a Cost of Quality (COQ) report except:

Which of the following items is not a tool that can be used by management to detect poor quality in an operation?

Which one of the following is not a category of the Cost of Quality (COQ) reporting model?

For Cost of Quality (COQ) reporting purposes, materials inspection costs would be classified as:

Which of the following is a tool that indicates how frequently each type of quality defect occurs?

A proper role for accounting in terms of managing and controlling quality is all of the following except:

What is the amount of the estimated loss, L(x), using a Taguchi loss function, if the actual quality characteristic, x, is 0.41?

Cost Management and Strategy

Implementing Strategy: the Value Chain, the Balanced Scorecard, and the Strategy Map

Basic Cost Management Concepts

Job Costing

Activity-Based Costing and Customer Profitability Analysis

Process Costing

Cost Allocation: Departments, Joint Products, and By-Products

Cost Estimation

Short-Term Profit Planning: Cost-Volume-Profit Cvp Analysis

Strategy and the Master Budget

Decision Making With a Strategic Emphasis

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and Strategic Pricing

Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management

Operational Performance Measurement: Further Analysis of Productivity and Sales

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers and Transfer Pricing

Management Compensation, Business Analysis, and Business Valuation

Filters

Exam 17: The Management and Control of Quality

The cost of statistical quality control in a product quality cost system is properly characterized as a(n):

In a Cost of Quality (COQ) framework, warranty costs are properly classified as:

Assume that based on the company's cost information, tolerance is set at 0.0009. What should the target specification ("target specs") for the product be?

In a Cost-of-Quality (COQ) reporting framework, costs incurred in conjunction with the measurement and analysis of data to ascertain conformity of products and services to specification are properly classified as:

Oslo Company's target quality characteristic, T, for one of its key components is set at 82. Using the Taguchi Loss Function the company has determined the cost coefficient, k, to be $6,000. What is the estimated loss, L(x), if the value of the quality characteristic, x, is 85?

Statistical quality control often involves the use of control charts, whose basic purpose is to:

Value stream costing attempts to do all of the following except:

Which of the following is not a likely consequence of improved product quality?

All of the following would generally be included in a Cost of Quality (COQ) report except:

Which of the following items is not a tool that can be used by management to detect poor quality in an operation?

Which one of the following is not a category of the Cost of Quality (COQ) reporting model?

For Cost of Quality (COQ) reporting purposes, materials inspection costs would be classified as:

Which of the following is a tool that indicates how frequently each type of quality defect occurs?

A proper role for accounting in terms of managing and controlling quality is all of the following except:

What is the amount of the estimated loss, L(x), using a Taguchi loss function, if the actual quality characteristic, x, is 0.41?

Cost Management and Strategy

Implementing Strategy: the Value Chain, the Balanced Scorecard, and the Strategy Map

Basic Cost Management Concepts

Job Costing

Activity-Based Costing and Customer Profitability Analysis

Process Costing

Cost Allocation: Departments, Joint Products, and By-Products

Cost Estimation

Short-Term Profit Planning: Cost-Volume-Profit Cvp Analysis

Strategy and the Master Budget

Decision Making With a Strategic Emphasis

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and Strategic Pricing

Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management

Operational Performance Measurement: Further Analysis of Productivity and Sales

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers and Transfer Pricing

Management Compensation, Business Analysis, and Business Valuation

Filters