Question 1

Which of the following statements about nonfinancial performance indicators of quality is not true?

Accepted Answer

A)  They can be useful predictors of future financial performance. 
B)  Generally speaking, they are costlier to generate than financial measures of quality. 
C)  They are timelier than financial data. 
D)  They are readily interpretable by operating personnel. 
E)  They help to identify precise quality-related problems. 
A)  They can be useful predictors of future financial performance. 
B)  Generally speaking, they are costlier to generate than financial measures of quality. 
C)  They are timelier than financial data. 
D)  They are readily interpretable by operating personnel. 
E)  They help to identify precise quality-related problems.

Question 2

The Taguchi Quality Loss Function (QLF) demonstrates that as the quality measure of a product declines, the loss due to quality defects:

Accepted Answer

A)  Increases as a quadratic function. 
B)  Increases as a linear function. 
C)  Increases at a decreasing rate. 
D)  Decreases as a quadratic function. 
E)  Increases as a step function. 
A)  Increases as a quadratic function. 
B)  Increases as a linear function. 
C)  Increases at a decreasing rate. 
D)  Decreases as a quadratic function. 
E)  Increases as a step function.

Question 3

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.$\begin{array}{lr}
\text { From time order is placed to time order received by manufacturing } & 10.0 \text { days } \
\text { From time order is received by manufacturing to time production begins } & 5.0 \text { days } \
\text { Inspection time } & 1.5 \text { days } \
\text { Process (manufacturing) time } & 3.0 \text { days } \
\text { Move time } & 2.5 \text { days }
\end{array}$What is the processing cycle efficiency (PCE) for this order (rounded to one decimal point, e.g., 34.721% = 34.7%)?

Accepted Answer

A)  25.0%. 
B)  13.6%. 
C)  37.5%. 
D)  69.2%. 
E)  33.3%. 
A)  25.0%. 
B)  13.6%. 
C)  37.5%. 
D)  69.2%. 
E)  33.3%.

Question 4

In a Cost of Quality (COQ) framework, rework costs incurred before shipment of product are considered:

Accepted Answer

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

Question 5

In a Cost of Quality (COQ) report, costs to acquire and install training equipment 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 6

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

Accepted Answer

A)  Calculated costs are used in setting product prices. 
B)  Reporting is done frequently (often weekly, or even daily). 
C)  Product aggregation—product costs are determined at the value-stream level. 
D)  Use of average costs for products in each value stream. 
E)  Includes, in the form of box score report, nonfinancial as well as financial performance results. 
A)  Calculated costs are used in setting product prices. 
B)  Reporting is done frequently (often weekly, or even daily). 
C)  Product aggregation—product costs are determined at the value-stream level. 
D)  Use of average costs for products in each value stream. 
E)  Includes, in the form of box score report, nonfinancial as well as financial performance results.

Question 7

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

Accepted Answer

A)  Increase in product flow (that is, throughput). 
B)  Increase in product quality. 
C)  Increase in inventory holdings. 
D)  Establishment of long-term relationships with suppliers. 
E)  Continuous-improvement perspective. 
A)  Increase in product flow (that is, throughput). 
B)  Increase in product quality. 
C)  Increase in inventory holdings. 
D)  Establishment of long-term relationships with suppliers. 
E)  Continuous-improvement perspective.

Question 8

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

1. Examples: Prevention cost—visit with

Question 9

Ladder Manufacturing specifies the quality characteristic of one of its popular products to be 0.400" ± 0.010. An analysis of company records for the last two years suggests that the average cost for warranty repair or replacement is $100.00 per unit. The customer service manager believes that the product is likely to fail during the warranty period when the quality characteristic exceeds on either side of the target of 0.400, by the tolerance of 0.010.

What is the amount of the estimated loss, L(x), using a Taguchi Quality Loss Function (QLF), if the actual quality characteristic, x, is 0.41? Round final answer to nearest dollar.

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 10

A tool that can be used to identify potential causes of failures or defects is a:

Accepted Answer

A)  Control chart. 
B)  Pareto diagram. 
C)  Fishbone (i.e., Ishikawa) diagram. 
D)  Run chart. 
E)  Six Sigma report. 
A)  Control chart. 
B)  Pareto diagram. 
C)  Fishbone (i.e., Ishikawa) diagram. 
D)  Run chart. 
E)  Six Sigma report.

Question 11

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 12

Which of the following is not a nonfinancial quality metric?

Accepted Answer

A)  Process yield (i.e., good output/total output). 
B)  Number of defective parts produced (e.g., parts-per-million, ppm). 
C)  Number of machine setups. 
D)  Machine up-time (or, machine down-time). 
E)  Trend in dollar amount of inventory held. 
A)  Process yield (i.e., good output/total output). 
B)  Number of defective parts produced (e.g., parts-per-million, ppm). 
C)  Number of machine setups. 
D)  Machine up-time (or, machine down-time). 
E)  Trend in dollar amount of inventory held.

Question 13

The following data of causes of absenteeism for a fellow student for the year just completed were available.
 $\begin{array}{lll}\text { Reason\# }&\text { Cause of Absenteeism }&\text { Number of Occurrences }\
1 & \text { Personal Illness } & 14 \
2 & \text { A child's illness } & 31 \
3 & \text { Car broke down } & 10 \
4 & \text { Personal emergency } & 38 \
5 & \text { Overslept } & 11 \
6 & \text { Unexplained visitor } & 13
\end{array}$ Required:
1. Use the above information to construct a histogram.
2.Use the information from requirement (1) to prepare a Pareto diagram.
(Note: In constructing the above two items, you can use the information in column 1 to describe each of the identified causes. That is, you can use the reference numbers rather than the actual verbal descriptions presented in column 2.)
3. Within the context of managing and control quality, what is the primary purpose played by tools such as histograms and Pareto diagrams?

Accepted Answer

1.Histogram @#IMG-DLM& Key to Histogram: (1) Perso

Question 14

Which of the following items is not a tool that can be used by management to take corrective action in a process deemed out of control?

Accepted Answer

A)  Cause-and-effect diagram. 
B)  Statistical quality control (SQ
C)  chart. 
C)  Fish-bone diagram. 
D)  Pareto diagram. 
E)  Histogram. 
A)  Cause-and-effect diagram. 
B)  Statistical quality control (SQ
C)  chart. 
C)  Fish-bone diagram. 
D)  Pareto diagram. 
E)  Histogram.

Question 15

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 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 16

The cost of using a statistical quality control system is properly characterized in a Cost of Quality (COQ) report 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.

Question 17

Listed below are selected line items from the Cost of Quality (COQ) report for Watson Products for last month: $$\begin{array} { l r } 
\text { Category } & \text { Amount } \
\hline \text { Rework } & \$ 725 \
\text { Equipment maintenance } & 1,154 \
\text { Product testing } & 786 \
\text { Product repair } & 695
\end{array}$$ What was Watson's total prevention and appraisal cost for last month?

Accepted Answer

A)  $786. 
B)  $1,154. 
C)  $1,849. 
D)  $1,940. 
E)  $2,665. 
A)  $786. 
B)  $1,154. 
C)  $1,849. 
D)  $1,940. 
E)  $2,665.

Question 18

A graph that depicts successive observations of an operation taken at constant intervals 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

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 $125.00 per unit. The customer service manager believes that the product is likely to fail during the warranty period when the quality characteristic exceeds on either side of the target of 0.500 the tolerance of 0.020.

Using a Taguchi quality loss function (QLF) for this company, what is the amount of the estimated loss (to four (4) decimal places) when the actual quality characteristic, x, is 0.505?

Accepted Answer

A)  $0.3906. 
B)  $7.8125. 
C)  $19.5313. 
D)  $125.0000. 
E)  $1,562.5000. 
A)  $0.3906. 
B)  $7.8125. 
C)  $19.5313. 
D)  $125.0000. 
E)  $1,562.5000.

Question 20

Quality costs for services include:

Accepted Answer

A)  Prevention costs and appraisal costs only. 
B)  Prevention costs, appraisal costs and internal failure costs only. 
C)  Appraisal costs and internal failure costs only. 
D)  Prevention costs, appraisal costs, internal failure costs, and external failure costs. 
E)  External failure costs only. 
A)  Prevention costs and appraisal costs only. 
B)  Prevention costs, appraisal costs and internal failure costs only. 
C)  Appraisal costs and internal failure costs only. 
D)  Prevention costs, appraisal costs, internal failure costs, and external failure costs. 
E)  External failure costs only.

Which of the following statements about nonfinancial performance indicators of quality is not true?

The Taguchi Quality Loss Function (QLF) demonstrates that as the quality measure of a product declines, the loss due to quality defects:

In a Cost of Quality (COQ) framework, rework costs incurred before shipment of product are considered:

In a Cost of Quality (COQ) report, costs to acquire and install training equipment would be classified as:

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

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

A tool that can be used to identify potential causes of failures or defects is a:

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

Which of the following is not a nonfinancial quality metric?

Which of the following items is not a tool that can be used by management to take corrective action in a process deemed out of control?

The cost of using a statistical quality control system is properly characterized in a Cost of Quality (COQ) report as a(n):

Listed below are selected line items from the Cost of Quality (COQ) report for Watson Products for last month: Category Amount Rework \ 725 Equipment maintenance 1,154 Product testing 786 Product repair 695 What was Watson's total prevention and appraisal cost for last month?

A graph that depicts successive observations of an operation taken at constant intervals is a(n):

Quality costs for services include:

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

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Exam 17: The Management and Control of Quality

Which of the following statements about nonfinancial performance indicators of quality is not true?

The Taguchi Quality Loss Function (QLF) demonstrates that as the quality measure of a product declines, the loss due to quality defects:

In a Cost of Quality (COQ) framework, rework costs incurred before shipment of product are considered:

In a Cost of Quality (COQ) report, costs to acquire and install training equipment would be classified as:

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

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

A tool that can be used to identify potential causes of failures or defects is a:

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

Which of the following is not a nonfinancial quality metric?

Which of the following items is not a tool that can be used by management to take corrective action in a process deemed out of control?

The cost of using a statistical quality control system is properly characterized in a Cost of Quality (COQ) report as a(n):

Listed below are selected line items from the Cost of Quality (COQ) report for Watson Products for last month: Category Amount Rework \ 725 Equipment maintenance 1,154 Product testing 786 Product repair 695 What was Watson's total prevention and appraisal cost for last month?

A graph that depicts successive observations of an operation taken at constant intervals is a(n):

Quality costs for services include:

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