Exam 19: Balanced Scorecard: Quality and Time

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.

LaCrosse Products has a budget of $904,000 in 2017 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $80,500 in variable costs. The new method will require $40,900 in training costs and $109,000 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 154,000 units. Appraisal costs for the year are budgeted at $610,000. The new prevention procedures will save appraisal costs of $50,100. Internal failure costs average $16 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-third. Internal failure units are destroyed. External failure costs average $56 per failed unit. The company's average external failures average 4% of units sold. The new proposal will reduce this rate by 45%. Assume all units produced are sold and there are no ending inventories. How much will appraisal costs change assuming the new prevention methods reduce material failures by 40% in the appraisal phase?

If Six Sigma's goal is to get defect rates down to 3.4 defects per every 100,000 units produced.

ISO 9000 are standards designed to encourage organizations to develop environmental management systems to reduce environmental costs.

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.

Cysco Corp has a budget of $1,207,000 in 2017 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $109,000 in variable costs. The new method will require $50,300 in training costs and $144,000 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 202,000 units. Appraisal costs for the year are budgeted at $501,000. The new prevention procedures will save appraisal costs of $50,100. Internal failure costs average $36 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 $56 per failed unit. The company's average external failures average 4.1% of units sold. The new proposal will reduce this rate to 2%. 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.

Customer response time comprises of ________.

Alex is injured and rushed to Care Hospitals for treatment. He spent 76 minutes at the hospital out of which he filled a form for 25 minutes, stood in the queue for 19 minutes, doctor treated him for 18 minutes, and payment time was 14 minutes. What is the service cycle efficiency for his visit?

In successful quality programs, companies decrease costs of quality and, in particular, internal and external failure costs as a percentage of revenues.

When evaluating alternatives to improve quality, both the relevant benefits as well as the relevant costs should be considered.

An example of a financial measure of customer satisfaction would be the percentage of defective products produced during a particular month.

Without financial quality measures, ________.

Percentage of reworked products is an example of a nonfinancial measure of internal business-process quality.

A quality improvement program is very costly to implement across a large corporation. Why do they do it? Explain.

Acme Janitor Service has always taken pride in the fact that it had one of the highest customer response times in the home cleaning service 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?

Which of the following best describes conformance quality?

Examples of nonfinancial measures of quality include the ________.

Venlaz Corp makes small motorcycles. The monthly demand ranges from 80 to 100 motorcycles. The average demand is 92 motorcycles. The plant operates 300 hours a month. Each cycle takes approximately 1.5 hours. If the company adds a new line of scooters, initial demand will be 20 per month. Each scooter will take 1 hour to make. To offset approaching production capacity, expanding the assembly line is possible. This will decrease manufacturing time for all products by 20%. However, this will increase the costs of cycles from $400 to $500 and scooters from $200 to $240. The change will also cause increases in prices from $700 to $750 for cycles and from $450 to $500 for scooters. Required: a.What is the average waiting time for cycles if they are the only item manufactured? b.What are the average waiting times if both cycles and scooters are produced and the assembly line is not enlarged? c.What are the average waiting times if both cycles and scooters are produced and the assembly line is enlarged? d.What is the expected monthly margin without scooters if the company sells all 92 cycles it manufactures? e.What are the expected monthly contribution margins if scooters are made with the current assembly line and with the new assembly line? Assume average sales and that sales equal production. f.What action do you recommend?

Cysco Corp has a budget of $1,202,000 in 2017 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 $149,000 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 205,000 units. Appraisal costs for the year are budgeted at $505,000. The new prevention procedures will save appraisal costs of $50,600. Internal failure costs average $34 per failed unit of finished goods. The internal failure rate is expected to be 6% 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 $58 per failed unit. The company's average external failures average 2.7% of units sold. The new proposal will reduce this rate to 2%. Assume all units produced are sold and there are no ending inventories. What is the net change in the budget of prevention costs if the procedures are automated in 2017? Will management agree with the changes?

A control chart identifies potential causes of failures or defects.