Exam 14: Quality and Environmental Cost Management

At the beginning of the year, Mike Gioulis initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years: Freceding Year Current Year Sales \ 2,400,000 \ 2,000,000 Scrap 40,000 30,000 Rework 100,000 70,000 Product inspection 12,000 18,000 Quality training 4,000 5,000 Material inspections 8,000 13,000 For the current year, external failure costs are what percentage of sales?

At the beginning of the year, Kowalski Company initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years: Freceding Year Current Year Sales \ 3,000,000 \ 3,000,000 Quality training 3,000 4,500 Material inspections 7,500 12,000 Scrap 60,000 45,000 Rework 120,000 75,000 Product inspection 15,000 30,000 Product warranty 105,000 82,500 For the current year, external failure costs are what percentage of sales?

As part of its environmental cost reporting system, Lamborghini Company tracks its total environmental costs. Consider the cost and sales data given: Total Year Environmental Costs Sales Revenue Operating Costs 2018 \ 7,500,000 \ 62,500,000 \ 50,000,000 2019 6,250,000 62,500,000 \ 50,000,000 2020 5,500,000 68,750,000 \ 50,000,000 2021 4,812,500 68,750,000 \ 50,000,000 What is the environmental costs as a percentage of sales for 2019? (Round to two decimal places.)

Coral Corporation reported the following sales and quality costs for the past four years. Assume that all quality costs are variable and that all changes in the quality cost ratios are due to a quality improvement program. Quality Costs as Year Sales Revenues Percent of Revenues 1 \ 4,000,000 22.0\% 2 4,200,000 20.0\% 3 4,400,000 18.0\% 4 4,800,000 15.0\% Required: a.Compute the quality costs for all four years. b.By what amount did net income increase from Year 1 to Year 2, from Year 2 to Year 3, and from Year 3 to Year 4 as a result of quality improvements? c.The management of Ambrosia Corporation believes it is possible to reduce quality costs to 2.5 percent of sales. Assuming sales will continue at the Year 4 level, calculate the additional profit potential.

The cost of processes which produce, market, delivers, and dispose of products are called __________ costs.

At the beginning of the year, Mike Gioulis initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years: Freceding Year Current Year Sales \ 2,400,000 \ 2,000,000 Scrap 40,000 30,000 Rework 100,000 70,000 Product inspection 12,000 18,000 Quality training 4,000 5,000 Material inspections 8,000 13,000 For the current year, appraisal costs are what percentage of sales?

Managers use interim quality standards to express quality goals on an interim basis.

Observable quality costs

The two types of quality performance reports are interim standard and long-range reports.

Which of the following activities is classified as value-added in activity-based management (ABM)?

The method which assumes that the total failure cost is some multiplier of measured failure costs is called:

Lower sales due to poor product performance is an example of

At the beginning of the year, Devonshire Company initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact of the quality improvement program, the following data were collected for the current and preceding years: Freceding Year Current Year Sales \ 2,400,000 \ 2,400,000 Quality training 30,000 48,000 Material inspections 7,000 8,000 Scrap 48,000 30,000 Rework 60,000 48,000 Product inspection 60,000 12,000 Product warranty 10,000 24,000 For the current year, internal failure costs are what percentage of sales?

Which of the following statements is true regarding a long-range quality report?

If prevention and appraisal costs increase, _____ costs are expected to decrease.

The following information pertains to Aquamarine, Inc., for the current year: Sales \ 1,500,000 Internal failure costs 150,000 External failure costs 90,000 Appraisal costs 50,000 Prevention costs 30,000 Cost of goods sold 600,000 If quality costs were reduced to 2 percent of sales, profits would increase by:

Which of the following is NOT a dimension of quality?

Within the robust view of strategy, describe the management strategy to reduce quality costs recommended by the American Society for Quality Control.

Receiving medical care due to polluted air is considered a(n)

Full private costing is the assignment of all environmental costs, private and societal, to products.