Exam 19: Cost Management: Quality, Time, and the Theory of Constraints

Customer-response time is a measure of how long it takes for the customer to return a call.

Quality of design measures how closely the characteristics of products or services meet the needs and wants of customers.

How much do external failure costs change if all changes are as anticipated with the new prevention procedures? Assume all units produced are sold and there are no ending inventories.

Each time Maiertree Care hires a new employee it must wait for some period of time before the employee can meet production standards. Management is unsure of the learning curve in its operations but it knows the first job by a new employee averages 60 hours and the second job averages 48 hours. Assume all jobs to be equal in size. Required: a. What is the learning curve percentage, assuming the cumulative average-time method? b. What is the time for a new employee to build 16 units with this learning curve using the cumulative average-time method? Assume the rate of learning factor is -0.1520.

Diane has been asked to consider plans to add the retrieval of larger tooling fixtures to her duties. She anticipates that there would be an average of 12 tooling fixtures per day requested. Each tooling fixture would take Diane 4 minutes to retrieve. What is the average waiting time, in minutes, if Diane continues to be the only worker that would retrieve the small tools as well as the larger tooling fixtures?

Try-Us-First Motors manufactures and sells off-road vehicles. The September sales were $6,000,000. Monthly design costs are $112,000 and rework is running at $75,000 per month. Its painting department is fully automated and requires substantial inspection to keep the machines operating properly. An improperly painted vehicle is very expensive to correct, and inspection hours for the 8,000 vehicles painted in September totaled 2,000 hours by 14 employees, who earn an average of $28 an hour. Ten litres of paint were used on average for each vehicle. The standard amount of paint per vehicle is nine litres. The cost of inspection for September was equal to the budgeted amount of $56,000. What are appraisal costs as a percentage of sales?

Producing more non-bottleneck output

Costs of Quality (COQ) are classified into four categories: prevention costs, appraisal costs, inspection costs, and warranty costs.

A graph of a series of successive observations of a particular step, procedure, or operation taken at regular intervals of time is a

What is the time needed to produce the last unit when production doubles from 100 units to the 200 unit level, given that the incremental unit time learning model has a 60% learning curve, and the corresponding time at the 100 unit level of production is 4.0 minutes?

The Alpha Beta Corporation experiences numerous instances of constraints hindering the effective operation of their manufacturing process. Identify the methods that might be used to maximize operating income, and minimize the effect of the constraints.

The Door Company manufactures doors. Classify each of the following quality costs as prevention costs, appraisal costs, internal failure costs, or external failure costs. a. Retesting of reworked products b. Downtime due to quality problems c. Analysis of the cause of defects in production d. Depreciation of test equipment e. Warranty repairs f. Lost sales arising from a reputation for poor quality g. Quality circles h. Rework direct manufacturing labour and overhead i. Net cost of spoilage j. Technical support provided to suppliers k. Audits of the effectiveness of the quality system l. Plant utilities in the inspection area m. Reentering data because of keypunch errors

Define cost of quality (COQ), list the four categories, and provide an example of each.

Management has offered to allow the prevention changes if all changes take place as anticipated and the amounts netted are less than the cost of the equipment. What is the net impact of all the changes created by the preventive changes?

Most companies do not measure the financial cost of design quality.

Statistical quality control includes a control chart that

To complete the first setup on a new machine took an employee 200 minutes. Using an 80% incremental unit-time learning curve indicates that the second setup on the new machine is expected to take

Carl Clarkson and Lenny Lenid have been assigned to review the costs of quality at the Sprotton Chemicals Ltd. for the month of September. All amounts are in thousands (000's). Some information from a competitor, Sheltonville Industries, has been leaked. You learn that Sheltonville's costs of quality (as a percentage of total costs of quality) is 15% on external failure, 20% on internal failure, 35% on appraisal and the rest on prevention. Required: a. Prepare a cost of quality report for September for the Sprotton Chemicals including calculations of each cost category as a percentage of total costs of quality. b. Compare Sprotton's approach to quality management to Sheltonville's. Comment on your findings. (What are the implications of the differences?)

The theory of constraints describes methods of reducing bottlenecks by identifying and reducing fixed costs previously viewed as variable.

Costs incurred in detecting which of the individual units do not conform to specifications are called