Exam 17: The Management and Control of Quality

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.

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

In a Cost of Quality (COQ) reporting framework, scrap costs because of quality failure would be classified as:

Lean manufacturing principles are derived in large part from the Toyota Production System (TPS). Which of the following is not associated with the TPS?

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

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?

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?

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

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.

The cost of statistical quality control in a product quality cost system is properly characterized as a(n):

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

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

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?

The Bulldog Company incurred the following quality-related costs: Required: 1. Calculate for each of the two years: • Total prevention costs • Total appraisal costs • Total internal failure costs • Total external failure costs 2. Provide two recommendations for improving the disclosure of COQ data for the current data set (i.e., providing more informative disclosures). 3. Based on the data in this exercise, and your solution to Requirement 1, what observations can you offer regarding COQ spending over the two-year period?

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?

The cost of scrap, rework, and tooling changes in a product quality cost system are properly categorized as a(n):

The quality cost of prevention:

Kray Co. manufactures high quality knives for use in the meat processing industry, and operates in an industry which values and rewards consistent production quality. Technical innovation over the past decade has given the industry a good supply of high quality steel in raw material form. Kray Co. recognizes the need to establish and maintain strong quality controls for labor activities. A company quality team has asked you to assist the company in recommending either a goalpost conformance quality plan or an absolute quality conformance plan to monitor its manufacturing activities. Required: 1. Briefly distinguish between the two approaches to ensuring conformance with production standards. 2. Explain how the Taguchi Quality Loss Function operates within the absolute quality conformance plan.3. Do you think worker reaction to the two plans in Part (1) above might be different? Why or why not?

Cycle time efficiency is:

What is the amount of the estimated loss using a Taguchi loss function if the actual quality characteristic, x, is 0.510?