Question 1

All of the following are examples of internal nonfinancial quality indicators except:

Accepted Answer

A) Number of customer complaints. 
B) Process yield (i.e., ratio of good outputs to total output). 
C) Productivity (i.e., ratio of acceptable output to resource inputs). 
D) Plant safety record (e.g., days since last major accident). 
E) Throughput. 
A) Number of customer complaints. 
B) Process yield (i.e., ratio of good outputs to total output). 
C) Productivity (i.e., ratio of acceptable output to resource inputs). 
D) Plant safety record (e.g., days since last major accident). 
E) Throughput.

Question 2

Regardless of the differences in format, a common feature that should be present in any Cost-of-Quality (COQ) Report is that the report:

Accepted Answer

A) Promotes the management and control of quality-related costs. 
B) Classifies costs by product line. 
C) Classifies costs by cost center or profit center. 
D) Classifies costs by behavior (e.g., fixed versus variable). 
E) Classifies costs by the external value stream. 
A) Promotes the management and control of quality-related costs. 
B) Classifies costs by product line. 
C) Classifies costs by cost center or profit center. 
D) Classifies costs by behavior (e.g., fixed versus variable). 
E) Classifies costs by the external value stream.

Question 3

The four accepted categories of a Cost of Quality (COQ) Report are prevention, appraisal, internal failure, and external failure. Assume your cost management instructor has given you an assignment related to COQ. You are to relate each of the cost categories above to the preparation of a class project, which is a study of an actual firm's cost management system. The typical student spends 16 hours researching an identified firm, five hours writing the report, and three hours in revising and presenting the report to the class.
Required:
1. Give an example of prevention, appraisal, internal failure, and external failure costs you might encounter in writing and presenting your report. (Example: "Draw up a time budget with necessary deadlines before starting the report" is an example of a prevention cost.)
2. Which of the four category examples you gave for Requirement (1) above has the greatest cost? What has the least cost? What has the greatest benefit? What has the least benefit? (Example: "Not saving word processing on a hard drive or jump drive" is an example of greatest cost in terms of time.)

Accepted Answer

Answer may vary
Feedback:
1. Examples: P

Question 4

In a Cost-of-Quality (COQ) reporting framework, the cost of scrap, rework, and tooling changes are categorized as a(n):

Accepted Answer

A) External failure cost. 
B) Internal failure cost. 
C) Manufacturing overhead cost. 
D) Avoidable cost. 
E) Appraisal cost. 
A) External failure cost. 
B) Internal failure cost. 
C) Manufacturing overhead cost. 
D) Avoidable cost. 
E) Appraisal cost.

Question 5

Management accountants can help support the quality initiatives of management by supplying decision makers with relevant financial information regarding these initiatives. Which of the following statements is true regarding costs that are relevant for decision making within this context?

Accepted Answer

A) Relevant costs are variable costs. 
B) Relevant costs are fixed costs. 
C) Relevant costs include out-of-pocket but not opportunity costs because the latter are not recorded by accounting systems. 
D) Relevant costs are future costs that differ across the decision alternatives. 
E) Relevant costs would not include estimated losses due to reduced market share. 
A) Relevant costs are variable costs. 
B) Relevant costs are fixed costs. 
C) Relevant costs include out-of-pocket but not opportunity costs because the latter are not recorded by accounting systems. 
D) Relevant costs are future costs that differ across the decision alternatives. 
E) Relevant costs would not include estimated losses due to reduced market share.

Question 6

Which of the following is not an external nonfinancial measure of quality?

Accepted Answer

A) Number of defective parts produced. 
B) Number of defective units shipped to customers. 
C) Number of customer complaints. 
D) Delivery delays (e.g., difference between scheduled and actual delivery date). 
E) Percentage of products that experience early or excessive failure. 
A) Number of defective parts produced. 
B) Number of defective units shipped to customers. 
C) Number of customer complaints. 
D) Delivery delays (e.g., difference between scheduled and actual delivery date). 
E) Percentage of products that experience early or excessive failure.

Question 7

Design Products is committed to its quality program. It works with all areas of the company to establish sound quality programs within reasonable budget guidelines. For 2013, it has budgeted $1,000,000 for prevention costs and $800,000 for appraisal costs. Internal failure has a budget of $100 per failed item, while external failure has a total budget of $600,000.Product Testing has proposed to a change in the 2013 budget for a new method of testing products. If management decides to implement the new method, $2 per unit of appraisal costs will be saved, up to a level of 200,000 tests. No additional savings are above past the 200,000 level. The new method involves $110,000 in training costs and $60,000 in yearly testing supplies. Traditionally, 3 percent of all completed items have to be reworked. External failure costs average $120 per failed unit. The company's average external failures are 1 percent of units sold. The company carries no ending inventories.
Required:
1. What is the adjusted budget for appraisal costs, assuming the new method is implemented and 800,000 units are tested during the manufacturing process in 2013?
2. How much do internal failure costs change, assuming 600,000 units are tested under the new method and it reduces the amount of unacceptable units in the manufacturing process by 40 percent?
3. What would be the change in the external failure budget, assuming external failures are reduced by 60 percent, assuming the same facts as in Requirement 2?

Accepted Answer

Answer may

Question 8

Which of the following is not a characteristic of a lean accounting system?

Accepted Answer

A) Costs in the system are organized according to value streams. 
B) The system includes both financial and nonfinancial performance indicators. 
C) It is most appropriate for firms operating in dynamic and competitive environments. 
D) The system incorporates the use of standard costs and standard cost variances. 
E) The overall intent of the system is to more accurately reflect improvements associated with lean manufacturing. 
A) Costs in the system are organized according to value streams. 
B) The system includes both financial and nonfinancial performance indicators. 
C) It is most appropriate for firms operating in dynamic and competitive environments. 
D) The system incorporates the use of standard costs and standard cost variances. 
E) The overall intent of the system is to more accurately reflect improvements associated with lean manufacturing.

Question 9

Which of the following items is not considered an external quality metric?

Accepted Answer

A) On-time delivery rates. 
B) Customer response time (CRT). 
C) Number of customer complaints. 
D) Throughput efficiency (i.e., the ratio of throughput to resources used). 
E) Percentage of products that experience early or excessive failure. 
A) On-time delivery rates. 
B) Customer response time (CRT). 
C) Number of customer complaints. 
D) Throughput efficiency (i.e., the ratio of throughput to resources used). 
E) Percentage of products that experience early or excessive failure.

Question 10

In a Cost of Quality (COQ) report, sales returns and allowances due to quality deficiency would be classified as:

Accepted Answer

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

Question 11

Conformance to a quality standard that requires all products or services to meet exactly the target value with no variation allowed is:

Accepted Answer

A) Control-chart conformance. 
B) Target conformance. 
C) Goalpost conformance. 
D) Absolute quality conformance. 
E) Benchmark quality conformance. 
A) Control-chart conformance. 
B) Target conformance. 
C) Goalpost conformance. 
D) Absolute quality conformance. 
E) Benchmark quality conformance.

Question 12

The tool that consists of a histogram of factors contributing to a specified quality problem, ordered from the most to the least frequently occurring factor is a:

Accepted Answer

A) Pareto diagram. 
B) Statistical process control histogram. 
C) Run chart. 
D) Statistical process control (SPQ) chart. 
E) Cause-and-effect diagram. 
A) Pareto diagram. 
B) Statistical process control histogram. 
C) Run chart. 
D) Statistical process control (SPQ) chart. 
E) Cause-and-effect diagram.

Question 13

What is the cost coefficient, k, for the Taguchi loss function associated with this situation?

Accepted Answer

A) $10. 
B) $500. 
C) $10,000. 
D) $1,000,000. 
E) $2,000,000. 
A) $10. 
B) $500. 
C) $10,000. 
D) $1,000,000. 
E) $2,000,000.

Question 14

Which of the following terms represents the unyielding and continuous effort by everyone in the organization to understand, meet, and exceed customer expectations?

Accepted Answer

A) Continuous-improvement standards. 
B) Flexible budgeting. 
C) ISO 9000. 
D) ISO 14000. 
E) Total quality management (TQM). 
A) Continuous-improvement standards. 
B) Flexible budgeting. 
C) ISO 9000. 
D) ISO 14000. 
E) Total quality management (TQM).

Question 15

Given the company's cost coefficient, k, what should the tolerance be (approximately) before conducting additional testing and adjusting at the factory?

Accepted Answer

A) 0.000009375. 
B) 0.0030615. 
C) 0.000625. 
D) 0.025. 
E) 0.25. 
A) 0.000009375. 
B) 0.0030615. 
C) 0.000625. 
D) 0.025. 
E) 0.25.

Question 16

Which of the following is not an expected result of improved quality of operations?

Accepted Answer

A) Decreased inventory turnover. 
B) Higher product/service selling prices. 
C) Faster throughput time. 
D) Lower total manufacturing cost. 
E) Increased sales volume. 
A) Decreased inventory turnover. 
B) Higher product/service selling prices. 
C) Faster throughput time. 
D) Lower total manufacturing cost. 
E) Increased sales volume.

Question 17

How much do you expect total external failure costs to change?

Accepted Answer

A) $10,000 increase. 
B) $200,000 decrease. 
C) $320,000 decrease. 
D) $400,000 decrease. 
E) $800,000 decrease. 
A) $10,000 increase. 
B) $200,000 decrease. 
C) $320,000 decrease. 
D) $400,000 decrease. 
E) $800,000 decrease.

Question 18

A graphical representation of the variation in a given set of data is a(n):

Accepted Answer

A) Control chart. 
B) Pareto diagram. 
C) Histogram. 
D) Ishikawa diagram. 
E) Cause-and-effect diagram. 
A) Control chart. 
B) Pareto diagram. 
C) Histogram. 
D) Ishikawa diagram. 
E) Cause-and-effect diagram.

Question 19

Which of the following is not a likely consequence of investments made to improve quality?

Accepted Answer

A) Reduced inventory turnover. 
B) Lower sales returns and sales allowances. 
C) Lower holdings of inventory. 
D) Faster throughput time. 
E) Reduced field-service costs. 
A) Reduced inventory turnover. 
B) Lower sales returns and sales allowances. 
C) Lower holdings of inventory. 
D) Faster throughput time. 
E) Reduced field-service costs.

Question 20

An example of an internal failure cost in a Cost-of-Quality (COQ) reporting system is:

Accepted Answer

A) Maintenance. 
B) Inspection. 
C) Rework. 
D) Product recalls. 
E) Contribution margin foregone in terms of lost sales. 
A) Maintenance. 
B) Inspection. 
C) Rework. 
D) Product recalls. 
E) Contribution margin foregone in terms of lost sales.

All of the following are examples of internal nonfinancial quality indicators except:

Regardless of the differences in format, a common feature that should be present in any Cost-of-Quality (COQ) Report is that the report:

In a Cost-of-Quality (COQ) reporting framework, the cost of scrap, rework, and tooling changes are categorized as a(n):

Management accountants can help support the quality initiatives of management by supplying decision makers with relevant financial information regarding these initiatives. Which of the following statements is true regarding costs that are relevant for decision making within this context?

Which of the following is not an external nonfinancial measure of quality?

Which of the following is not a characteristic of a lean accounting system?

Which of the following items is not considered an external quality metric?

In a Cost of Quality (COQ) report, sales returns and allowances due to quality deficiency would be classified as:

Conformance to a quality standard that requires all products or services to meet exactly the target value with no variation allowed is:

The tool that consists of a histogram of factors contributing to a specified quality problem, ordered from the most to the least frequently occurring factor is a:

What is the cost coefficient, k, for the Taguchi loss function associated with this situation?

Which of the following terms represents the unyielding and continuous effort by everyone in the organization to understand, meet, and exceed customer expectations?

Given the company's cost coefficient, k, what should the tolerance be (approximately) before conducting additional testing and adjusting at the factory?

Which of the following is not an expected result of improved quality of operations?

How much do you expect total external failure costs to change?

A graphical representation of the variation in a given set of data is a(n):

Which of the following is not a likely consequence of investments made to improve quality?

An example of an internal failure cost in a Cost-of-Quality (COQ) reporting system is:

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

All of the following are examples of internal nonfinancial quality indicators except:

Regardless of the differences in format, a common feature that should be present in any Cost-of-Quality (COQ) Report is that the report:

In a Cost-of-Quality (COQ) reporting framework, the cost of scrap, rework, and tooling changes are categorized as a(n):

Management accountants can help support the quality initiatives of management by supplying decision makers with relevant financial information regarding these initiatives. Which of the following statements is true regarding costs that are relevant for decision making within this context?

Which of the following is not an external nonfinancial measure of quality?

Which of the following is not a characteristic of a lean accounting system?

Which of the following items is not considered an external quality metric?

In a Cost of Quality (COQ) report, sales returns and allowances due to quality deficiency would be classified as:

Conformance to a quality standard that requires all products or services to meet exactly the target value with no variation allowed is:

The tool that consists of a histogram of factors contributing to a specified quality problem, ordered from the most to the least frequently occurring factor is a:

What is the cost coefficient, k, for the Taguchi loss function associated with this situation?

Which of the following terms represents the unyielding and continuous effort by everyone in the organization to understand, meet, and exceed customer expectations?

Given the company's cost coefficient, k, what should the tolerance be (approximately) before conducting additional testing and adjusting at the factory?

Which of the following is not an expected result of improved quality of operations?

How much do you expect total external failure costs to change?

A graphical representation of the variation in a given set of data is a(n):

Which of the following is not a likely consequence of investments made to improve quality?

An example of an internal failure cost in a Cost-of-Quality (COQ) reporting system is:

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