Exam 17: The Management and Control of Quality

Conformance to a quality specification expressed as a specified range around a target is generally referred to as:

A graphical representation of frequency of occurrence of the factors contributing to an indicated quality problem, ordered from the most to the least frequent, is a(n):

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 is the case with 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?

Product-quality-related costs are part of a total quality control program. A product-quality-related cost incurred in detecting individual products that do not conform to specifications is an example of a(n):

Inspection costs for reworked units would be classified, for Cost of Quality (COQ) reporting purposes, as:

A quality circle:

Which of the following nonfinancial performance indicators would be least applicable in a lean accounting system?

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

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. 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).

Wolk Corporation is a highly automated manufacturing firm. The vice president of finance has decided that traditional standards are inappropriate for performance measures in an automated environment. Labor for this company is insignificant in terms of the total cost of production and tends to be fixed, material quality is considered more important than minimizing material cost, and customer satisfaction is the number one priority. As a result, delivery performance measures have been chosen to evaluate performance. The following information is considered typical of the time involved to complete customer orders. From time order is placed to time order received by manufacturing 10.0 days From time order is received by manufacturing to time production begins 5.0 days Inspection time 1.5 days Process (manufacturing) time 3.0 days Move time 2.5 days What is the production (manufacturing) lead time for this order?

Verizon Manufacturing Company spent $400,000 in 2019 to inspect incoming components. Of the $400,000, $240,000 is fixed appraisal costs. The variable inspection cost is $0.20 per component. It takes two components for each finished product. Internal failure costs average $80 per failed unit of finished goods. In 2019, five percent of all completed items had to be reworked. External failure costs average $200 per failed unit. The company's average external failures are one percent of units sold. The company manufactures all units as ordered and carries no materials inventories. Seeking to decrease its total cost of quality (COQ), Verizon contracted Quality-is-Free Consultants, Inc. (QIFC) to study ways to improve product quality and to reduce costs. Upon completion of the study, QIFC recommended automatic inspection equipment that requires a $60,000 annual cost for training and $150,000 for equipment rental and maintenance. The new equipment will eliminate $40,000 of the fixed appraisal costs, reduce the amount of unacceptable product units in the manufacturing process by 10 percent, and cut product failures by half. The company paid the consulting firm $100,000 in early January 2020 for the project. Verizon expects no changes in its operating level in the foreseeable future. How much are internal failure costs in total projected to change?

The cost of scrap, rework, and tooling changes in a Cost of Quality (COQ) Report are properly categorized as a(n):

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

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 2019, 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 2019 budget for a new method of testing products. If management decides to implement the new method, $2.00 per unit of appraisal costs will be saved, up to a level of 200,000 tests. No additional savings are expected past the 200,000-unit level. The new method involves $110,000 in training costs and $60,000 in yearly testing supplies. Traditionally, 3.0 percent of all completed items must be reworked. External failure costs average $120 per failed unit. The company's average external failures are 1.0 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 2019? 2. How much do internal failure costs change, assuming 600,000 units are tested under the new method and that under this new method the number of unacceptable units in the manufacturing process decreases by 40 percent? 3. What would be the change in the external failure cost budget, assuming external failures are reduced by 60 percent, assuming the same facts as in Requirement 2?

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

Value stream income statements, which are part of a lean accounting system, have all the following characteristics except:

For Cost of Quality (COQ) reporting purposes, contribution margin of canceled sales orders due to quality deficiency would be classified as:

Which of the following items represents a quadratic loss function associated with deviation of actual quality from target quality?

An electronic component in a computer has an output voltage specification of 100 ±1.0 millivolts. The loss to the firm for a component that is outside of the specifications is $750. The output voltage for a sample unit is 101 millivolts. Required: 1. Calculate (to the nearest dollar) the value of k, the cost coefficient in the Taguchi Quality Loss Function (QLF). 2. Calculate (to the nearest dollar) the estimated quality loss, L(x), for x =101.

Chapter 17 presents (as Exhibit 17.3) a framework that can be used as the basis for creating a comprehensive system for managing and controlling quality. Required: Provide an overview of the key elements of the framework presented in the chapter.