Question 1

Which of the following costs would be classified as an external failure cost on a quality report?

Accepted Answer

A) Reliability engineering. 
B) Materials inspection. 
C) Rework. 
D) Warranty repairs. 
E) Pilot studies/focus-group sessions. 
A) Reliability engineering. 
B) Materials inspection. 
C) Rework. 
D) Warranty repairs. 
E) Pilot studies/focus-group sessions. D

Question 2

Which of the following costs is often considered the hardest to measure?

Accepted Answer

A) Prevention costs. 
B) Appraisal costs. 
C) Internal failure costs. 
D) External failure costs. 
E) Cost of lost sales. 
A) Prevention costs. 
B) Appraisal costs. 
C) Internal failure costs. 
D) External failure costs. 
E) Cost of lost sales. E

Question 3

Lead indicators of performance in a balance scorecard are important because:

Accepted Answer

A) they guide future management actions. 
B) they measure the financial outcomes of earlier management decisions. 
C) they serve as a basis for motivating managers now in order to produce desirable results in the future. 
D) they confirm key financial measures such as the return on assets ratio. 
E) they have no impact on future management actions. 
A) they guide future management actions. 
B) they measure the financial outcomes of earlier management decisions. 
C) they serve as a basis for motivating managers now in order to produce desirable results in the future. 
D) they confirm key financial measures such as the return on assets ratio. 
E) they have no impact on future management actions. C

Question 4

Calculate the EOQ for each of the following independent scenarios: $\begin{array}{lccc}
& \text { Scenario 1 } & \text { Scenario 2 } & \text { Scenario 3 } \
\text { Annual requirement (in units) } & 14,560 & 2,080 & 660 \
\text { Annual holding cost per unit } & 5 & 30 & 10 \
\text { Cost per order } & 300 & 20 & 30
\end{array}$

Accepted Answer

Scenario 1: √[(2)(14,560 x 300

Question 5

Measures of performance relating to internal operations and processes include:

Accepted Answer

A) percentage of customers retained. 
B) number of employees in required training programs. 
C) percentage of manual transaction errors. 
D) return on assets ratio. 
E) percentage revenue growth. 
A) percentage of customers retained. 
B) number of employees in required training programs. 
C) percentage of manual transaction errors. 
D) return on assets ratio. 
E) percentage revenue growth.

Question 6

Which of the following costs would be classified as an internal failure cost on a quality report?

Accepted Answer

A) Reliability engineering. 
B) Materials inspection. 
C) Rework. 
D) Warranty repairs. 
E) Out-of-court liability settlements. 
A) Reliability engineering. 
B) Materials inspection. 
C) Rework. 
D) Warranty repairs. 
E) Out-of-court liability settlements.

Question 7

Following a strategy of product differentiation, Janzen Inc. makes a high-end product entitled "40H.". Janzen Inc. presents the following data for the years 2011 and 2012: $\begin{array} { l r r } 
& \mathbf { 2 0 1 1 } & \mathbf { 2 0 1 2 } \
\text { Units of } 40 \mathrm { H } \text { started } & \$ 21,000 & \$ 22,000 \
\text { Selling price } & \$ 300 & \$ 320 \
\text { Direct materials cost per square foot } & \$ 50,000 & \$ 51,500 \
\text { Direct materials square feet } & 30 & 32 \
\text { Manufacturing capacity for } 40 \mathrm { H } \text { (units) } & 30,000 & 30,000 \
\text { Total conversion costs } & \$ 1,500,000 & \$ 1,600,000 \
\text { Conversion costs per unit of capacity } & \$ 30 & \$ 34 \
\text { Selling and customer service capacity (number of customers) } & 70 & 68 \
\text { Total selling and customer service costs } & \$ 460,000 & \$ 462,500 \
\text { Cost per customer of selling and customer service capacity } & \$ 7,000 & \$ 7,250
\end{array}$ Janzen Inc. produces no defective units but it wants to reduce the direct materials usage per unit of 40H in 2012. Manufacturing conversion costs in each year depend upon production capacity defined in terms of the number of 40H units that can be produced. Selling and customer-service costs depend upon the number of customers that the customer and service functions are designed to support. Janzen Inc. had 55 customers in 2011 and 62 customers in 2012. The industry market for 40H units increased by 6% from 2011 to 2012. Which of the following is a measure of the financial perspective?

Accepted Answer

A) Re-engineering process. 
B) Market share in the 40H market. 
C) Order delivery time. 
D) Improving manufacturing processes. 
E) Operating income growth from charging higher profit margins for 40H. 
A) Re-engineering process. 
B) Market share in the 40H market. 
C) Order delivery time. 
D) Improving manufacturing processes. 
E) Operating income growth from charging higher profit margins for 40H.

Question 8

Quality of conformance refers to:

Accepted Answer

A) the extent to which a product meets the specifications of its design. 
B) the extent to which a product adds value to a firm's product line. 
C) the extent to which a product is designed for its intended use. 
D) the extent to which a product maximizes non-value-added activities in the production process. 
E) a cost control that is achievable. 
A) the extent to which a product meets the specifications of its design. 
B) the extent to which a product adds value to a firm's product line. 
C) the extent to which a product is designed for its intended use. 
D) the extent to which a product maximizes non-value-added activities in the production process. 
E) a cost control that is achievable.

Question 9

Handicomputer Company was having significant quality problems in its manufacturing plant. To remedy the situation, management implemented various up-front procedures and programs that were expected to reduce the production of bad units to acceptable (normal) levels and benefit the firm financially. If the procedures and programs functioned as intended, what is likely true about the amounts Handicomputer incurred for prevention cost, internal failure cost, and external failure cost respectively?

Accepted Answer

A) increase, increase, decrease. 
B) increase, increase, increase. 
C) increase, decrease, decrease. 
D) decrease, decrease, decrease. 
E) increase, decrease, increase. 
A) increase, increase, decrease. 
B) increase, increase, increase. 
C) increase, decrease, decrease. 
D) decrease, decrease, decrease. 
E) increase, decrease, increase.

Question 10

Which of the following is not a typical quality-cost classification?

Accepted Answer

A) External failure cost. 
B) Internal failure cost. 
C) Production inefficiency cost. 
D) Prevention cost. 
E) Appraisal cost. 
A) External failure cost. 
B) Internal failure cost. 
C) Production inefficiency cost. 
D) Prevention cost. 
E) Appraisal cost.

Question 11

Balanced scorecards contain a number of factors that are important to the success of a business. These factors are often divided into four categories: financial, customer, learning and growth, and internal operations.
Consider the twelve factors that follow. $\begin{array} { | c | l | } 
\hline \text { 1. } & \text { Market share } \
\hline \text { 2. } & \text { Earnings per share } \
\hline \text { 3. } & \text { Manufacturing cycle efficiency } \
\hline \text { 4. } & \text { Machine downtime } \
\hline \text { 5. } & \text { Number of patents held } \
\hline \text { 6. } & \text { Employee suggestions } \
\hline \text { 7. } & \text { Number of repeat sales } \
\hline \text { 8. } & \text { Levels of inventories held } \
\hline \text { 9. } & \text { Number of vendors used } \
\hline \text { 10. } & \text { Cash flow from operations } \
\hline \text { 11. } & \text { Employee training hours } \
\hline 12 . & \text { Gross margin } \
\hline
\end{array}$ Required:
Determine the proper classification (financial, customer, learning and growth, or internal operations) for each of the twelve factors listed.

Accepted Answer

None

Question 12

Incremental costs of more expensive processes installed to reduce pollution are commonly known as:

Accepted Answer

A) monitoring costs. 
B) abatement costs. 
C) on-site remediation costs. 
D) off-site remediation costs. 
E) opportunity costs. 
A) monitoring costs. 
B) abatement costs. 
C) on-site remediation costs. 
D) off-site remediation costs. 
E) opportunity costs.

Question 13

A company that strives to maximize the value of its pollution-related activities would follow a(n):

Accepted Answer

A) process improvement strategy. 
B) prevention strategy. 
C) end-of-pipe strategy. 
D) visible cost strategy. 
E) matrix strategy. 
A) process improvement strategy. 
B) prevention strategy. 
C) end-of-pipe strategy. 
D) visible cost strategy. 
E) matrix strategy.

Question 14

The following information for a recent project was taken from the records of Green Company: $\begin{array} { l r } 
\text { Processing time } & 30 \text { days } \
\text { Inspection time } & 2 \text { days } \
\text { Waiting time: } & \
\text { From order receipt until start of production } & 8 \text { days } \
\text { From start of production through project completion } & 2 \text { days } \
\text { Move time } & 2.5 \text { days }
\end{array}$ Required:
A. How long did it take to complete the project once production commenced?
B. Compute the manufacturing cycle efficiency.
C. As judged by the cycle efficiency, what percentage of the overall production time was spent on (1) value-adding activities and (2) non-value adding activities?

Accepted Answer

None

Question 15

Manufacturing cycle time is a popular non-financial measure used to evaluate performance.
Required:
A. Define manufacturing cycle time and indicate the optimal value (i.e., number) for this measure.
B. Provide examples of two changes in a manufacturing process that would help improve a company's cycle time.

Accepted Answer

A. Cycle time is defined as processing t

Question 16

To assess how customers perceive a company's products, management would likely not study:

Accepted Answer

A) the defective rate for the company's products 
B) the cost of repairing returned products. 
C) the number of products returned. 
D) the number of warranty claims. 
E) the number of customer complaints. 
A) the defective rate for the company's products 
B) the cost of repairing returned products. 
C) the number of products returned. 
D) the number of warranty claims. 
E) the number of customer complaints.

Question 17

Air Canada Cargo operates an overnight package delivery service that competes with United Parcel Service (UPS). Top management is considering the use of a balanced scorecard to evaluate operations.
A. The balanced scorecard is a business model that helps to assess a firm's competitive position and ensures that the firm is progressing toward long-term survival. Balanced scorecards differ from organization to organization; however, in addition to customer-satisfaction measures, most have a combination of financial measures, internal operating measures, and measures of innovation/growth and learning.
A. What is a balanced scorecard and other than customer-satisfaction measures, what are its typical key components?
B. Customer-satisfaction measures could include number of packages delivered, market share, number of packages lost or damaged, number of customer complaints, average wait time when calling and scheduling a package pickup, and response time to customer problems.
B. List four customer-satisfaction measures that Continental might use to evaluate performance.

Accepted Answer

A. The balanced scorecard is a business

Question 18

The manufacturing cycle efficiency for Olsen Inc. when the processing time is five hours and inspection, waiting, and move time are two hours each is (rounded):

Accepted Answer

A) 0.40. 
B) 0.45. 
C) 0.83. 
D) 1.00. 
E) 2.50. 
A) 0.40. 
B) 0.45. 
C) 0.83. 
D) 1.00. 
E) 2.50.

Question 19

Which of the following costs would be classified as an appraisal cost on a quality report?

Accepted Answer

A) Reliability engineering. 
B) Materials inspection. 
C) Rework. 
D) Warranty repairs. 
E) Out-of-court liability settlements. 
A) Reliability engineering. 
B) Materials inspection. 
C) Rework. 
D) Warranty repairs. 
E) Out-of-court liability settlements.

Question 20

Following a strategy of product differentiation, Rumsen Tools Corp. makes a hand sander sold in hardware stores. Rumsen presents the following data for the years 2011 and 2012: $\begin{array} { | l | r | r | } 
\hline & \mathbf { 2 0 1 1 } & \mathbf { 2 0 1 2 } \
\hline \text { Units started } & \$ 11,000 & \$ 11,500 \
\hline \text { Selling price } & \$ 200 & \$ 210 \
\hline \text { Direct materials cost per square foot } & \$ 40,000 & \$ 40,750 \
\hline \text { Direct materials square feet } & 7 & 10 \
\hline \text { Manufacturing capacity (units) } & 13,500 & 13,500 \
\hline \text { Total conversion costs } & \$ 3,500,000 & \$ 377,500 \
\hline \text { Conversion costs per unit of capacity } & \$ 30 & \$ 32 \
\hline \text { Selling and customer service capacity (mumber of customers) } & 20 & 19 \
\hline \text { Total selling and customer service costs } & \$ 80,000 & \$ 80,625 \
\hline \text { Cost per customer of selling and customer service capacity } & \$ 4,000 & \$ 4,125 \
\hline
\end{array}$ Rumsen produces no defective units but it wants to reduce the direct materials usage per hand sanderin 2012. Manufacturing conversion costs in each year depend upon production capacity defined in terms of the number of units that can be produced. Selling and customer-service costs depend upon the number of customers that the customer and service functions are designed to support. Rumsen had 33 customers in 2011 and 35 customers in 2011. The industry market size for hand sanders had increased by 7% from 2011 to 2012. Which of the following is a measure of the internal business perspective?

Accepted Answer

A) operating income growth from charging higher profit margins for hand sanders. 
B) market share in the hand sander market. 
C) order delivery time. 
D) improving manufacturing processes. 
E) real-time feedback capacity. 
A) operating income growth from charging higher profit margins for hand sanders. 
B) market share in the hand sander market. 
C) order delivery time. 
D) improving manufacturing processes. 
E) real-time feedback capacity.

Which of the following costs would be classified as an external failure cost on a quality report?

Which of the following costs is often considered the hardest to measure?

Lead indicators of performance in a balance scorecard are important because:

Calculate the EOQ for each of the following independent scenarios: Scenario 1 Scenario 2 Scenario 3 Annual requirement (in units) 14,560 2,080 660 Annual holding cost per unit 5 30 10 Cost per order 300 20 30

Measures of performance relating to internal operations and processes include:

Which of the following costs would be classified as an internal failure cost on a quality report?

Quality of conformance refers to:

Which of the following is not a typical quality-cost classification?

Incremental costs of more expensive processes installed to reduce pollution are commonly known as:

A company that strives to maximize the value of its pollution-related activities would follow a(n):

To assess how customers perceive a company's products, management would likely not study:

The manufacturing cycle efficiency for Olsen Inc. when the processing time is five hours and inspection, waiting, and move time are two hours each is (rounded):

Which of the following costs would be classified as an appraisal cost on a quality report?

The Changing Role of Managerial Accounting

Basic Cost Management Concepts

Product Costing and Cost Accumulation

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behaviour, and Cost Estimation

Cost-Volume-Profit Analysis, Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing and Flexible Budgeting

Responsibility Accounting, Investment Centres, and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

Filters

Exam 10: Cost Management Tools

Which of the following costs would be classified as an external failure cost on a quality report?

Which of the following costs is often considered the hardest to measure?

Lead indicators of performance in a balance scorecard are important because:

Calculate the EOQ for each of the following independent scenarios: Scenario 1 Scenario 2 Scenario 3 Annual requirement (in units) 14,560 2,080 660 Annual holding cost per unit 5 30 10 Cost per order 300 20 30

Measures of performance relating to internal operations and processes include:

Which of the following costs would be classified as an internal failure cost on a quality report?

Quality of conformance refers to:

Which of the following is not a typical quality-cost classification?

Incremental costs of more expensive processes installed to reduce pollution are commonly known as:

A company that strives to maximize the value of its pollution-related activities would follow a(n):

To assess how customers perceive a company's products, management would likely not study:

The manufacturing cycle efficiency for Olsen Inc. when the processing time is five hours and inspection, waiting, and move time are two hours each is (rounded):

Which of the following costs would be classified as an appraisal cost on a quality report?

The Changing Role of Managerial Accounting

Basic Cost Management Concepts

Product Costing and Cost Accumulation

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behaviour, and Cost Estimation

Cost-Volume-Profit Analysis, Absorption and Variable Costing

Profit Planning and Activity-Based Budgeting

Standard Costing and Flexible Budgeting

Responsibility Accounting, Investment Centres, and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

Filters