Exam 16: Quality, Time and the Balanced Scorecard

Carpentaria Language School produces CDs and DVDs to teach English as a Second Language to new migrants.Carpentaria has just prepared a Cost of Quality Report which shows a decline in prevention costs as a percentage of total sales over a three-year period.What changes might Carpentaria expect to see in (i)appraisal costs as a percentage of sales, (ii)internal failure costs as a percentage of sales,and (iii)external failure costs as a percentage of sales given this trend? _____________________________________________________________________________________________ _____________________________________________________________________________________________

What are costs incurred to prevent making products that do not conform to specifications known as? Variant question

Management should always look for opportunities to generate higher revenues,not only cost reductions,from quality improvements.

Cost of quality reports usually do not consider:

Briefly explain how a manufacturer of personal computers such as Dell Computer can benefit from the introduction of a quality improvement program. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Acme Cleaning Products has always taken pride in the fact that it had one of the highest customer response times in the home cleaning industry.However,as the products manufactured for this industry have become more complex,the company's customer-response time has declined. Required: Why do you think that response time declined if all other quality factors have remained the same? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Describe the implications of not having financial and non-financial quality measures. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Answer the following questions using the information below: Mildura Products has a budget of $1 200 000 in 2018 for prevention costs.If it decides to automate a portion of its prevention activities,it will save $75 000 in variable costs.The new method will require $24 000 in training costs and $145 000 in annual equipment costs.Management is willing to adjust the budget for an amount up to the cost of the new equipment.The budgeted production level is 210 000 units. Appraisal costs for the year are budgeted at $500 000.The new prevention procedures will save appraisal costs of $35 000.Internal failure costs average $20 per failed unit of finished goods.The internal failure rate is expected to be 4% of all completed items.The proposed changes will cut the internal failure rate by one-half.Internal failure units are destroyed.External failure costs average $48 per failed unit.The company's average external failures average 2.5% of units sold.The new proposal will reduce this rate to 1%.Assume all units produced are sold and there are no ending inventories. -How much do external failure costs change if all the changes are as the new prevention procedures anticipated? Assume all units produced are sold and there are no ending inventories.

The costs relating to new materials testing are classified as appraisal costs.

Answer the following questions using the information below: Mildura Products has a budget of $1 200 000 in 2018 for prevention costs.If it decides to automate a portion of its prevention activities,it will save $75 000 in variable costs.The new method will require $24 000 in training costs and $145 000 in annual equipment costs.Management is willing to adjust the budget for an amount up to the cost of the new equipment.The budgeted production level is 210 000 units. Appraisal costs for the year are budgeted at $500 000.The new prevention procedures will save appraisal costs of $35 000.Internal failure costs average $20 per failed unit of finished goods.The internal failure rate is expected to be 4% of all completed items.The proposed changes will cut the internal failure rate by one-half.Internal failure units are destroyed.External failure costs average $48 per failed unit.The company's average external failures average 2.5% of units sold.The new proposal will reduce this rate to 1%.Assume all units produced are sold and there are no ending inventories. -Many companies believe that they should eliminate all failure costs and have ____________ defects.

Inventory carrying costs are the __________________ costs of investment tied up in inventory.

Answer the following questions using the information below: Kosciuszko Landscapes produces Landscape photographs for sale through catalogues.The company has two workstations: photo production and framing.The photo production station is limited by the speed of operating the photo development machine.Framing is limited by the speed of the employees.Framing normally waits for work from photo production.Each department works an eight-hour day.If Kosciuszko Landscapes adds an earlier half shift so that photo production begins work four hours earlier than framing each day,the two departments generally finish their work at about the same time.This eliminates the bottleneck,and increases finished units produced each day by 300 units.All units produced can be sold.The cost of operating the photo production department four more hours each day is $2800.The contribution margin of the finished products is $15 each. -Conducting business correctly and quickly helps increase revenues and decrease costs.

Answer the following questions using the information below: O'Grady's Cycle Repairs shop has a variable demand.Historically,its demand has ranged from 20 to 25 bicycle repairs per day with an average of 20.Evan,the mechanic,works eight hours a day,five days a week.Each order is one bicycle repair and each bicycle repair takes 20 minutes. -What is the average waiting time,in minutes?

A machine has been identified as a bottleneck and the source of the constraint for a manufacturing company that has multiple products and multiple machines.Discuss ways the company can overcome the bottleneck. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Answer the following questions using the information below: O'Grady's Cycle Repairs shop has a variable demand.Historically,its demand has ranged from 20 to 25 bicycle repairs per day with an average of 20.Evan,the mechanic,works eight hours a day,five days a week.Each order is one bicycle repair and each bicycle repair takes 20 minutes. -What is the cycle time for an order?

Observations outside control limits serve as inputs for Pareto diagrams.

Baby Care Products has just completed a very successful program of improving quality in its manufacturing operations.The next step is to improve the operations of its administrative functions,starting with the accounting information system.As the manager of the accounting operations,you are requested to begin a quality improvement program. Required: What are some possibilities of finding out about the current status of quality in the accounting system? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Answer the following questions using the information below: Nurioopta Products has a budget of $900 000 in 2018 for prevention costs.If it decides to automate a portion of its prevention activities,it will save $65 000 in variable costs.The new method will require $24 000 in training costs and $110 000 in annual equipment costs.Management is willing to adjust the budget for an amount up to the cost of the new equipment.The budgeted production level is 170 000 units. Appraisal costs for the year are budgeted at $600 000.The new prevention procedures will save appraisal costs of $30 000.Internal failure costs average $15 per failed unit of finished goods.The internal failure rate is expected to be 3% of all completed items.The proposed changes will cut the internal failure rate by one-third.Internal failure units are destroyed.External failure costs average $54 per failed unit.The company's average external failures average 3% of units sold.The new proposal will reduce this rate by 50%.Assume all units produced are sold and there are no ending inventories. -How much will internal failure costs change if the internal product failures are reduced by 50% with the new procedures?

Botany Frozen Foods Company prepares frozen food for fast-food restaurants.It has two workstations: cooking and packing.The cooking station is limited by the cooking time of the food.Packing is limited by the speed of the workers.Packing normally waits on food from cooking.Because the demand has increased in recent months to 3200 dozen units,management is considering adding another cooking station or else having the cooks start work earlier. The monthly cost of operating the cooking station one more hour each day is $2800.The cost of adding another cooking station would add an average of $10 per hour.The current operating hours total eight hours a day,22 days a month.The contribution margin of the finished products is currently $9 per dozen.Inventory carrying costs average $2.50 per dozen per month.Either the extra hour or the new cooking station would increase production by 20 dozen a day,with a long-run increase of 80 dozen units in finished goods inventory to 280 dozen. Required: a.What is the total production per month if the change is made? b.What is the increase in the expected monthly product contribution for each of the possible changes? Assume long-run production equals sales. _____________________________________________________________________________________________ _____________________________________________________________________________________________

When a firm has a bottleneck machine,a good way to manage the bottleneck is to make sure that prior machines produce more units for the bottleneck machine to increase its throughput.