Exam 17: The Management and Control of Quality

One of the concerns with moving to lean manufacturing is the fact that conventional accounting approaches may discourage such a move. These deficiencies relate to the lag in recognizing financial benefits from the move to lean. Required: According to critics, what are the three primary reasons why improvements in financial results, after adopting lean manufacturing, typically appear later in conventional accounting statements than the operating improvements from implementing lean manufacturing?

In a Cost of Quality (COQ) report, test equipment maintenance costs would be classified as:

A common characteristic among control charts, histograms, Pareto diagrams, and cause-and-effect diagrams is that they are:

Pandra Manufacturing specifies the quality characteristic of one of its popular products to be 0.500 ± 0.020. An analysis of company records for the last two years suggests that the average cost for warranty repair or replacement is $125 per unit. The customer service manager is of the opinion that the product is likely to fail during the warranty period when the quality characteristic differs from the target by more than 0.020 in either direction. Required: To gain a better understanding of the impact of quality variation, you, the product manager, would like to know the following values in a Taguchi loss function, L(x). 1. Cost coefficient, k 2. Estimated losses, L(x), when the actual quality characteristic, x, is 0.505. (Round your answer to four decimal places.) 3. Estimated losses, L(x), when the actual quality characteristic, x, is 0.510. (Round your answer to two decimal places.) 4. The amount of change in the estimated losses (or total quality cost) when the deviation from the quality characteristic doubled. What general principle regarding Taguchi Quality Loss Functions is revealed by this example?

Six Sigma, absolute versus goalpost, and Taguchi loss functions all represent ways to:

This question deals with the general topic of nonfinancial performance indicators. Required: Chapter 17 of the text discusses both financial and nonfinancial performance indicators that can be used to manage and control quality. Provide a description of each of the following two nonfinancial quality indicators: 1. Customer response time (CRT) 2. Cycle time efficiency 3. Into what three components can CRT be broken down?

Identify the appropriate cost-of-quality (COQ) category for each of the following items: 1. Engineering time spent to simplify production processes. 2. Engineering time spent on engineering change orders to reduce the number of component used in a current product. 3. Scrap resulting from substandard materials undetected by the receiving personnel. 4. Rework to correct inconsistency caused by machine variability. 5. Preventive maintenance on machinery. 6. Product inspections. 7. Air freight to replace a defective part discovered by a customer. 8. Long-distance call to a customer who has experienced a quality failure.

Using a Taguchi loss function for this company, what is the amount of the estimated loss when the actual quality characteristic, x, is 0.505?

Costs incurred as a result of poor quality found through appraisal prior to delivery of the product to the customer are, in a Cost-of-Quality (COQ) reporting framework, considered:

The Hormosa Company classifies its overall Cost of Quality (COQ) into four categories. COQ components, as a percentage of cost of goods sold for the last three years, are as follows: Required: 1. Prepare a histogram that shows the COQ trends for each of the four components of COQ as well as total COQ over the period 2011 through 2013. Note: Index numbers (1) through (4) may be used in place of a description key. For example, in labeling your histogram you can use "1" to refer to "Prevention Costs," etc. 2. Of what interpretive or managerial value is the histogram you prepared, both in a general sense and as it relates to the data set at hand?

Which of the following approaches to cost-system design is likely most appropriate for a lean manufacturing context?

Quality costs for services include:

Because of the need to improve its competitive standing, the XYZ Company has embraced a JIT production philosophy. To facilitate the transition to JIT, the company is contemplating a change in its production layout. You, as the management accountant for the company, have recently been asked to prepare an analysis of relevant costs and benefits associated with the proposed change in plant layout. After consulting with relevant managers within the company, you have come up with the following pieces of information: (a) Estimated cost to move/reinstall existing machinery and equipment = $100,000. (b) Estimated increase in sales = 20% (to $1,200,000). (This increase is based on an assumed decrease in production cycle time under the new plan layout. Past experience shows an average contribution margin of 31% of sales revenue.) (c) Inventory-related costs are predicted to decrease by 25%. Currently, the company holds an average inventory of approximately $200,000. You estimate that inventory-holding costs amount to 15% (on an annual basis). Required: 1. Should the company implement the proposed change in plant layout? To support your answer show calculations associated with the first-year financial effect associated with the change. 2. What other considerations might be made before a decision regarding the change in factory layout is made?

Hyland Company manufactures generic products for several major discount chain stores. Robert Hyland, founder and CEO, has always followed a strategy of producing low-cost standardized products. Hyland now is facing foreign competitors who offer similar products with higher quality and more features (options) than Hyland's products. Although Hyland still offers the lower prices than its competitors, Hyland's net income has been steadily decreasing over the last three quarters. Required: What should Hyland do?

Heidelberg Manufacturing specifies the quality characteristic for one of its key components to be 154" ±4. The cost of failure is estimated to be $8,000 per unit. Using the Taguchi Loss Function the firm has estimated the loss, L(x), at the quality characteristic that the firm has experienced, x, to be $4,500. What is the estimated loss if the deviation from the value of the quality characteristic doubled?

Which of the following statements regarding the meaning of "quality" is true?

Which of the following is not a characteristic of lean manufacturing?

What is the reasoning behind the misconception that quality improvements decrease productivity?

All of the following approaches can be used to set quality-related performance expectations except:

Which of the following is not a characteristic of the general framework for managing and controlling quality depicted in Chapter 17?