Question 1

In a Cost of Quality (COQ) report, test equipment maintenance 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. C

Question 2

Slumberger Manufacturing Co., Inc. is considering a change in its manufacturing layout (e.g., to a flexible manufacturing system [FMS] or cellular manufacturing), but it is unsure of the net benefits it should expect in conjunction with such a move. Company management has asked you to estimate both financial and nonfinancial effects of the proposed move. In this regard, you have collected the following information:
   Required:
1. As a result of the change, inventory carrying costs are expected to change by what amount?
2. If the plant layout change is made, what is the projected amount for incremental manufacturing cost for the year, in terms of out-of-pocket costs?
3. What are the projected incremental financial results(per year) associated with this change?
4. What are some plausible nonfinancial performance metrics that the company might monitor after implementing the proposed change?

Accepted Answer

Answer may vary
Feedback:
1. The proposed change in plant layout is expected to reduce Work-in-Process inventories by approximately $35,000 during each year (given). At an opportunity cost (i.e., cost of capital) of 10%, the annual cost savings associated with a reduction in holding of WIP inventory is estimated to be 10% × $35,000 = $3,500.
2. Under the revised plant layout option, total (out-of-pocket) manufacturing costs are expected to increase by $20,000 per year: a) Total current manufacturing cost = $600,000 x 50% = $300,000 per year. b) Revised total manufacturing cost = $800,000 × 40% = $320,000 per year.4. As noted in the text, a comprehensive reporting model for the plant layout move would include both financial information (per the above) and nonfinancial performance indicators. The following are plausible nonfinancial performance indicators that the company might want to monitor in conjunction with the proposed change. (Note: answers should be linked specifically to the specific change being contemplated by the example at hand.)
:
1. Machine uptime (or the converse, machine downtime)
2. Trend in dollar amount of inventory held.
3. Production (manufacturing) lead time.
4. Cycle time efficiency (i.e., process cycle efficiency = ratio of value-added time to total manufacturing time).
5. Throughput efficiency (i.e., ratio of throughput to some measure of resources used)
(i.e., customer satisfaction measures):
1. Customer response time (CRT) (that is, total lapse of time between receipt of a customer's order and actual receipt of that order by the customer)
2. Number of defective units shipped to customers.
3. Delivery delays.
4. On-time delivery performance (i.e., percentage of shipments to customers made on or before the promised delivery date)
3. Total annual financial results, including both out-of-pocket and opportunity costs, are expected to increase by $183,500, as follows:

Question 3

The $100,000 payment to the consulting firm for COQ reporting purposes is best classified as a(n):

Accepted Answer

A) Prevention cost. 
B) Appraisal cost. 
C) Internal failure cost. 
D) External failure cost. 
E) Administrative cost. 
A) Prevention cost. 
B) Appraisal cost. 
C) Internal failure cost. 
D) External failure cost. 
E) Administrative cost. A

Question 4

Explain what is meant by the term "net promoter score" and what relevance this metric has in terms of the goal of developing a comprehensive framework for managing and controlling quality.

Accepted Answer

Answer may vary
Feedback: "Net promoter

Question 5

Typically, as prevention and appraisal costs increase, other costs of quality:

Accepted Answer

A) Are not affected. 
B) Change, but the direction cannot be predicted. 
C) Increase proportionately. 
D) Decrease. 
E) Decrease proportionally. 
A) Are not affected. 
B) Change, but the direction cannot be predicted. 
C) Increase proportionately. 
D) Decrease. 
E) Decrease proportionally.

Question 6

The four categories of cost associated with a Cost-of-Quality (COQ) reporting system are:

Accepted Answer

A) External failure, internal failure, prevention, and carrying. 
B) External failure, internal failure, prevention, and appraisal. 
C) External failure, internal failure, training, and appraisal. 
D) Warranty, product liability, training, and appraisal. 
E) Warranty, product liability, prevention, and appraisal. 
A) External failure, internal failure, prevention, and carrying. 
B) External failure, internal failure, prevention, and appraisal. 
C) External failure, internal failure, training, and appraisal. 
D) Warranty, product liability, training, and appraisal. 
E) Warranty, product liability, prevention, and appraisal.

Question 7

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 8

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:

Accepted Answer

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

Question 9

White Financial Services Corporation is engaged in mortgage origination and investment servicing activities with annual revenues of more than $90 million. Roberta White, CEO, recently has discovered that errors are costing the company over $800,000 per year. Jeremy Aiken, Vice President of Sales, dismisses the significance of the errors. Since the cost of errors is less than 1% of revenues, he believes the company should ignore the errors and concentrate instead on generating additional revenues. The consulting firm that made the discovery proposed to establish operating procedures for White that would build quality checks into operations. The interviewing, writing, and training activities associated with this project are expected to cost $450,000. Once the procedure is in place, the consultant believes, all errors will be eliminated. Jeremy argues that no system can be error-free and that the procedure is most likely to eliminate 80 percent of the errors. James White, Vice President of Customer Services, suggests that the company can hire 10 additional workers at an average salary of $30,000 (including fringe benefits) to double-check the work of people in sensitive areas.
Required: What do you think White Financial Services Company should do? Support your answer with a logical analysis of the three alternatives (hire the consulting firm, hire additional workers, or do nothing about the errors and concentrate on additional revenues).

Accepted Answer

Answer may vary
Feedback: The best solut

Question 10

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 11

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 12

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.

Question 13

A quality circle:

Accepted Answer

A) Is a large group of employees from the same work area who meet regularly to identify and solve work-related problems and to implement and monitor solutions to these problems. 
B) Does not implement and monitor solutions to the problems. 
C) Is a small group of employees from the same work area who meet regularly to identify and solve work-related problems and to implement and monitor solutions to these problems. 
D) Is a small group of employees from different work areas who meet regularly to identify and solve work-related problems and to implement and monitor solutions to these problems. 
E) Does not meet regularly. 
A) Is a large group of employees from the same work area who meet regularly to identify and solve work-related problems and to implement and monitor solutions to these problems. 
B) Does not implement and monitor solutions to the problems. 
C) Is a small group of employees from the same work area who meet regularly to identify and solve work-related problems and to implement and monitor solutions to these problems. 
D) Is a small group of employees from different work areas who meet regularly to identify and solve work-related problems and to implement and monitor solutions to these problems. 
E) Does not meet regularly.

Question 14

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

Accepted Answer

A) Construct a Cost of Quality (COQ) report. 
B) Take corrective action for quality-related problems. 
C) Set performance expectations regarding the level of quality associated with a product, service, or process. 
D) Detect poor quality products and services. 
E) Construct value-stream income statements under "lean manufacturing." 
A) Construct a Cost of Quality (COQ) report. 
B) Take corrective action for quality-related problems. 
C) Set performance expectations regarding the level of quality associated with a product, service, or process. 
D) Detect poor quality products and services. 
E) Construct value-stream income statements under "lean manufacturing."

Question 15

The set of international quality-related standards, adopted in 1987 and revised in both 1994 and in 2000, is referred to as:

Accepted Answer

A) ISO 14000. 
B) International Financial Reporting Standard No. 14000. 
C) International Financial Reporting Standard No. 9000. 
D) ISO 9000. 
E) SEC Release 20-F. 
A) ISO 14000. 
B) International Financial Reporting Standard No. 14000. 
C) International Financial Reporting Standard No. 9000. 
D) ISO 9000. 
E) SEC Release 20-F.

Question 16

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 17

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

Accepted Answer

A) Days' supply of inventory on hand. 
B) On-time delivery rates. 
C) Manufacturing process cycle time. 
D) Customer-response time (CRT). 
E) Percentage of overhead costs absorbed into production. 
A) Days' supply of inventory on hand. 
B) On-time delivery rates. 
C) Manufacturing process cycle time. 
D) Customer-response time (CRT). 
E) Percentage of overhead costs absorbed into production.

Question 18

How much are internal failure costs projected to change?

Accepted Answer

A) $20,000 decrease. 
B) $45,000 decrease. 
C) $80,000 decrease. 
D) $160,000 decrease. 
E) $320,000 decrease. 
A) $20,000 decrease. 
B) $45,000 decrease. 
C) $80,000 decrease. 
D) $160,000 decrease. 
E) $320,000 decrease.

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

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

Accepted Answer

A) Taguchi quality loss function (QLF) analysis. 
B) Six sigma. 
C) Goalpost conformance. 
D) Absolute conformance. 
E) Ideal Performance. 
A) Taguchi quality loss function (QLF) analysis. 
B) Six sigma. 
C) Goalpost conformance. 
D) Absolute conformance. 
E) Ideal Performance.

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

The $100,000 payment to the consulting firm for COQ reporting purposes is best classified as a(n):

Explain what is meant by the term "net promoter score" and what relevance this metric has in terms of the goal of developing a comprehensive framework for managing and controlling quality.

Typically, as prevention and appraisal costs increase, other costs of quality:

The four categories of cost associated with a Cost-of-Quality (COQ) reporting system are:

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

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:

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

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

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

A quality circle:

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

The set of international quality-related standards, adopted in 1987 and revised in both 1994 and in 2000, is referred to as:

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:

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

How much are internal failure costs projected to change?

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

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

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

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

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

The $100,000 payment to the consulting firm for COQ reporting purposes is best classified as a(n):

Explain what is meant by the term "net promoter score" and what relevance this metric has in terms of the goal of developing a comprehensive framework for managing and controlling quality.

Typically, as prevention and appraisal costs increase, other costs of quality:

The four categories of cost associated with a Cost-of-Quality (COQ) reporting system are:

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

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:

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

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

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

A quality circle:

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

The set of international quality-related standards, adopted in 1987 and revised in both 1994 and in 2000, is referred to as:

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:

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

How much are internal failure costs projected to change?

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

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

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

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