Question 1

The cost of poor quality at a nonbottleneck operation is the cost of the materials wasted.

Accepted Answer

A) True 
 B)False

Question 2

What is the change in the daily contribution margin if the change is made?

Accepted Answer

A)  $(608) 
B)  $(634) 
C)  $(672) 
D)  $800 
E)  $960 
A)  $(608) 
B)  $(634) 
C)  $(672) 
D)  $800 
E)  $960

Question 3

The demand for Ballard's Glass Company's products varies, ranging from 10 to 20 windows a day with an average of 15. John Ballard works eight hours a day, five days a week. Each order is one window, and each window takes 26 minutes to install. The company plans to add doors to its product line and anticipates that they will sell an average of 5 doors per day. Each door takes 12 minutes to install. Ballard is concerned with the increased waiting time if it adds doors. To offset this concern it can hire a part-time employee. This will decrease windows time to 20 minutes and doors to 10 minutes. However, this will increase the costs of windows from $10 to $12 and doors from $6 to $7.50. Since he is giving customers faster service he will increase his prices from $17 to $20 for windows and from $10 to $12 for doors.
What is the daily contribution margin if he sells both windows and doors and the part-time person is hired?

Accepted Answer

A)  $185.00 
B)  $142.50 
C)  $140.00 
D)  $97.50 
E)  $72.00 
A)  $185.00 
B)  $142.50 
C)  $140.00 
D)  $97.50 
E)  $72.00

Question 4

A control chart identifies potential causes of failures or defects.

Accepted Answer

A) True 
 B)False

Question 5

________ refers to the average amount of time that an order will be in line before it is set up and processed.

Accepted Answer

A)  Average manufacturing cycle time 
B)  Average customer response time 
C)  Average waiting time 
D)  Average on-time performance 
E)  Average setup time (per cycle) 
A)  Average manufacturing cycle time 
B)  Average customer response time 
C)  Average waiting time 
D)  Average on-time performance 
E)  Average setup time (per cycle)

Question 6

Vestor Ltd. has estimated a 90% cumulative average-time learning curve applies to labour time to manufacture its new product. The first unit took 18 hours. If Vestor's estimates are correct, how many hours will be used to manufacture 4 total units?

Accepted Answer

A)  14.58 hours 
B)  64.80 hours 
C)  72.00 hours 
D)  64.01 hours 
E)  58.32 hours 
A)  14.58 hours 
B)  64.80 hours 
C)  72.00 hours 
D)  64.01 hours 
E)  58.32 hours

Question 7

Design quality refers to the performance of a product or service relative to its design and product specification.

Accepted Answer

A) True 
 B)False

Question 8

What is the average waiting time, in minutes?

Accepted Answer

A)  2 
B)  3 
C)  5 
D)  2.5 
E)  7 
A)  2 
B)  3 
C)  5 
D)  2.5 
E)  7

Question 9

Two common operational measures of time are customer-response time and manufacturing lead time.

Accepted Answer

A) True 
 B)False

Question 10

Three tools used to detect quality problems include control charts, Pareto charts, and cause and effect diagrams. Briefly explain each of these tools.

Accepted Answer

A control chart is a graph of a series o

Question 11

The demand for Ballard's Glass Company's products varies, ranging from 10 to 20 windows a day with an average of 15. John Ballard works eight hours a day, five days a week. Each order is one window, and each window takes 26 minutes to install. The company plans to add doors to its product line and anticipates that they will sell an average of 5 doors per day. Each door takes 12 minutes to install. Ballard is concerned with the increased waiting time if it adds doors. To offset this concern it can hire a part-time employee. This will decrease window time to 20 minutes and door time to 10 minutes; increase the costs of windows from $10 to $12 and doors from $6 to $7.50. Since Ballard is giving customers faster service it will increase its prices from $17 to $20 for windows and from $10 to $12 for doors.
What is the expected daily revenue with and without doors, respectively, assuming average sales units are used and it hires a part-time employee if doors are sold?

Accepted Answer

A)  $230 and $170 
B)  $260 and $200 
C)  $360 and $255 
D)  $315 and $300 
E)  $400 and $340 
A)  $230 and $170 
B)  $260 and $200 
C)  $360 and $255 
D)  $315 and $300 
E)  $400 and $340

Question 12

Supplier evaluations are an example of

Accepted Answer

A)  appraisal costs. 
B)  prevention costs. 
C)  internal failure costs. 
D)  design costs. 
E)  external failure costs. 
A)  appraisal costs. 
B)  prevention costs. 
C)  internal failure costs. 
D)  design costs. 
E)  external failure costs.

Question 13

Warranty repair costs are

Accepted Answer

A)  prevention costs. 
B)  appraisal costs. 
C)  an internal failure cost. 
D)  a marketing cost. 
E)  an external failure cost. 
A)  prevention costs. 
B)  appraisal costs. 
C)  an internal failure cost. 
D)  a marketing cost. 
E)  an external failure cost.

Question 14

What is the net change in the budget of prevention costs if the procedures are automated in the current year?

Accepted Answer

A)  $40,000 decrease 
B)  $52,000 increase 
C)  $52,000 decrease 
D)  $92,000 increase 
E)  $92,000 decrease 
A)  $40,000 decrease 
B)  $52,000 increase 
C)  $52,000 decrease 
D)  $92,000 increase 
E)  $92,000 decrease

Question 15

Internal failure costs include

Accepted Answer

A)  field repairs. 
B)  rework. 
C)  liability claims 
D)  warranty expenses. 
E)  supplier evaluations. 
A)  field repairs. 
B)  rework. 
C)  liability claims 
D)  warranty expenses. 
E)  supplier evaluations.

Question 16

The financial cost of quality measures serves as a common denominator for evaluating trade-offs among prevention costs and failure costs.

Accepted Answer

A) True 
 B)False

Question 17

Wilson's Language School manufactures CDs and DVDs to teach English as a Second Language. Wilson has just prepared a Cost of Quality Report, and the staff has noticed a decline in prevention costs as a percentage of total sales over a three-year period. What changes might Wilson expect to see in appraisal costs as a percentage of sales, internal failure costs as a percentage of sales, and external failure costs as a percentage of sales given this trend?

Accepted Answer

Most likely, the decline in prevention c

Question 18

The theory of constraints analyzes fixed costs and considers short-run costs to be variable costs.

Accepted Answer

A) True 
 B)False

Question 19

A company has identified the following data:   What is the order manufacturing time?

Accepted Answer

A)  9 minutes 
B)  15 minutes 
C)  55 minutes 
D)  64 minutes 
E)  79 minutes 
A)  9 minutes 
B)  15 minutes 
C)  55 minutes 
D)  64 minutes 
E)  79 minutes

Question 20

How much will external failure costs change assuming 400,000 units of materials are received and that the product failures with customers are cut in half with the new receiving method?

Accepted Answer

A)  $10,000 increase 
B)  $200,000 decrease 
C)  $320,000 decrease 
D)  $400,000 decrease 
E)  $500,000 decrease 
A)  $10,000 increase 
B)  $200,000 decrease 
C)  $320,000 decrease 
D)  $400,000 decrease 
E)  $500,000 decrease

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

The cost of poor quality at a nonbottleneck operation is the cost of the materials wasted.

What is the change in the daily contribution margin if the change is made?

A control chart identifies potential causes of failures or defects.

________ refers to the average amount of time that an order will be in line before it is set up and processed.

Vestor Ltd. has estimated a 90% cumulative average-time learning curve applies to labour time to manufacture its new product. The first unit took 18 hours. If Vestor's estimates are correct, how many hours will be used to manufacture 4 total units?

Design quality refers to the performance of a product or service relative to its design and product specification.

What is the average waiting time, in minutes?

Two common operational measures of time are customer-response time and manufacturing lead time.

Three tools used to detect quality problems include control charts, Pareto charts, and cause and effect diagrams. Briefly explain each of these tools.

Supplier evaluations are an example of

Warranty repair costs are

What is the net change in the budget of prevention costs if the procedures are automated in the current year?

Internal failure costs include

The financial cost of quality measures serves as a common denominator for evaluating trade-offs among prevention costs and failure costs.

The theory of constraints analyzes fixed costs and considers short-run costs to be variable costs.

A company has identified the following data: What is the order manufacturing time?

How much will external failure costs change assuming 400,000 units of materials are received and that the product failures with customers are cut in half with the new receiving method?

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

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