Exam 19: Balanced Scorecard: Quality and Time

Answer the following questions using the information below: Cysco Corp has a budget of $1,200,000 in 2015 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $100,000 in variable costs. The new method will require $50,000 in training costs and $140,000 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 200,000 units. Appraisal costs for the year are budgeted at $500,000. The new prevention procedures will save appraisal costs of $50,000. Internal failure costs average $30 per failed unit of finished goods. The internal failure rate is expected to be 5% 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 $50 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. -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?

Answer the following questions using the information below: Strykerz Corp expects to spend $800,000 in 2015 in appraisal costs if it does not change its incoming materials inspection method. If it decides to implement a new receiving method, it will save $60,000 in fixed appraisal costs and variable costs of $0.50 per unit of finished product. The new method involves $140,000 in training costs and an additional $150,000 in annual equipment rental. Internal failure costs average $160 per failed unit of finished goods. During 2014, 5% of all completed items had to be reworked. External failure costs average $400 per failed unit. The company's average external failures are 1% of units sold. The company carries no ending inventories, because all jobs are on a per order basis and a just-in-time inventory ordering method is used. -What would be the change in the external failure budget,if 600,000 units are used and assuming external failures are reduced by 10%.

Identifying and minimizing the sources of non-value-added manufacturing time increases a firm's responsiveness to its customers and reduces its costs.

In the banking industry,depositing a customer's check into the wrong bank account is an example of quality of design failure.

As per control charts,nonrandom variations occurs when ________.

An example of a nonfinancial measure for customer satisfaction is ________.

Strykerz Corp expects to spend $800,000 in 2015 in appraisal costs if it does not change its incoming materials inspection method.If it decides to implement a new receiving method,it will save $60,000 in fixed appraisal costs and variable costs of $0.50 per unit of finished product.The new method involves $140,000 in training costs and an additional $150,000 in annual equipment rental. Internal failure costs average $160 per failed unit of finished goods.During 2014,5% of all completed items had to be reworked.External failure costs average $400 per failed unit.The company's average external failures are 1% of units sold.The company carries no ending inventories,because all jobs are on a per order basis and a just-in-time inventory ordering method is used. How much will external failure costs change assuming 800,000 units of materials are received and that product failures with customers are cut in half with the new receiving method?

Which of the following is a storage cost?

Answer the following questions using the information below: Cysco Corp has a budget of $1,200,000 in 2015 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $100,000 in variable costs. The new method will require $50,000 in training costs and $140,000 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 200,000 units. Appraisal costs for the year are budgeted at $500,000. The new prevention procedures will save appraisal costs of $50,000. Internal failure costs average $30 per failed unit of finished goods. The internal failure rate is expected to be 5% 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 $50 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 will internal failure costs change if the internal product failures are reduced by 40% with the new procedures?

A corporation can measure its quality performance by using financial or nonfinancial measures of quality.Discuss the merits of each method and whether the use of one precludes the use of the other.

An advantage of nonfinancial measures of quality include that they ________.

A Pareto diagram is usually in a bar-chart format,that indicates how frequently each type of defect occurs,ordered from the most frequent to the least frequent.

External failure costs are costs incurred on defective products after they have been shipped to customers.

The average waiting time is the average amount of time an order will wait at the company's shipping office before it is sent to the customer.

Relevant-cost and relevant-revenue analysis uses the allocated costs as the base for calculating the costs of a quality improvement program.

Conformance quality is the performance of a product or service relative to its design and product specifications.

Manufacturing cycle times affect both revenues and costs.Explain.

Any factor where a change in the factor causes a change in the speed with which an activity is undertaken is referred to as ________.

Without nonfinancial quality measures,________.

Appraisal costs are costs incurred to preclude the production of products that do not conform to specifications.