Carlson Chemical produces a number of chemical products,two of which are Product A and Product B.The controller and environmental manager have identified the following environmental activities and costs associated with the two products: $\begin{array}{lr} &\text { Product A }&\text { Product B }\\ \text { Kilograms produced } & 1,000,000 & 2,500,000 \\ \text { Packaging materials (kilograms) } & 300,000 & 150,000 \\ \text { Energy usage (kilowatt hours) } & 100,000 & 50,000 \\ \text { Toxic releases (kilograms into air) } & 250,000 & 50,000 \\ \text { Pollution control (machine hours) } & 40,000 & 10,000\\ \\ \text { Costs of activities: }\\ \text { Using packaging materials } & \$ 450,000 \\ \text { Using energy } & 120,000 \\ \text { Releasing toxins (fines) } & 60,000 \\ \text { Operating pollution control equipment } & 140,000 \end{array}$ a.Calculate the environmental cost per kilogram for each product. b.Which of the two appears to cause the most degradation to the environment?

a.Using packaged materials: $450,000/450

Opie Corporation reported the following operating costs and environmental quality costs for the past four years. Assume that all environmental quality costs are variable and that all changes in the quality cost ratios are due to an environmental cost reduction program. \[\begin{array}{l} &\text { Quality Costs as }\\ \text { Year } & \text { Operatine Casts } & \text { Percent of Operatine Casts } \\ \hline 20 X 1 & \$ 3,000,000 & 25.0 \\ 20 X 2 & 3,100,000 & 23.0 \\ 20 X 3 & 3,200,000 & 21.0 \\ 20 X 4 & 3,300,000 & 20.0 \end{array}\] -Refer to the figure.What is the change in environmental costs from 20X2 to 20X3?

A) $12,000 B) $37,000 C) $41,000 D) $672,000 A) $12,000 B) $37,000 C) $41,000 D) $672,000

At the beginning of the year,Randy 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: $\begin{array}{lrr}&\text { Preceding Year }&\text { Current Year }\\ \text { Sales } & \$ 5,000,000 & \$ 5,000,000 \\ \text { Quality training } & 6,000 & 9,000 \\ \text { Material inspections } & 15,000 & 12,000 \\ \text { Scrap } & 80,000 & 60,000 \\ \text { Rework } & 15,000 & 12,000 \\ \text { Product inspection } & 25,000 & 30,000 \\ \text { Product warranty } & 150,000 & 120,000 \end{array}$ a.Compute each category of quality costs as a percentage of sales for each year. Prevention costs Appraisal costs Internal failure costs External failure costs b.How much has profit increased as a result of quality improvements? c.If quality costs can be reduced to 2.5 percent of sales,how much additional profit would result?

a.Preventive: Quality training Appraisa

At the beginning of the year, John Corporation 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: \[\begin{array} { l r r } & \text { Preceding Year } & \text { Current Year } \\ \text { Sales } & \$ 2,000,000 & \$2,000,000 \\ \text { Quality training } &2,000 & 3,000 \\ \text { Material inspections } & 5,00 & 8,000 \\ \text { Scrap } & 40,000 & 30,000 \\ \text { Rework } & 80,000 & 50,000 \\ \text { Product inspection } & 10,000 &20,000 \\ \text { Product waranty } &70,000 & 5,000 \end{array}\] -Refer to the figure.For the current year,what percentage of sales are internal failure costs?

A) 1.50% B) 2.50% C) 2.90% D) 4.00% A) 1.50% B) 2.50% C) 2.90% D) 4.00%

At the beginning of the year, Grant 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: \[\begin{array} { l r r } & \text { Preceding Year } & \text { Current Year } \\ \text { Sales } & \$ 3,000,000 & \$ 3,000,000 \\ \text { Quality training } & 3,000 & 4,500 \\ \text { Material inspections } & 7,500 & 12,000 \\ \text { Scrap } & 60,000 & 45,000 \\ \text { Rework } & 120,000 & 75,000 \\ \text { Product inspection } & 15,000 & 30,000 \\ \text { Product waranty } & 105,000 & 82,500 \end{array}\] -Refer to the figure.For the current year,what percentage of sales are appraisal costs?

A) 0.14% B) 0.40% C) 1.00% D) 1.40% A) 0.14% B) 0.40% C) 1.00% D) 1.40%

Roberts Corporation reported the following operating costs and environmental quality costs for the past four years.Assume that all environmental quality costs are variable and that all changes in the quality cost ratios are due to an environmental cost reduction program. $\begin{array}{lcc} \text { Year }&\text {Quality Costs as Operating Costs}&\text { Percentage of Operating Cost }\\ 20 X 1 & \$ 4,000,000 & 24.0 \\ 20 X 2 & 4,100,000 & 22.0 \\ 20 X 3 & 4,200,000 & 20.0 \\ 20 X 4 & 4.300,000 & 18.0 \end{array}$ What is the change in environmental costs from 20X1 to 20X2?

A) $58,000 B) $66,000 C) $902,000 D) $960,000 A) $58,000 B) $66,000 C) $902,000 D) $960,000

At the beginning of the year, Andrew 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: $\begin{array}{lrr} &\underline{\text {Preceding Year}}& \underline{\text {Current Year}}\\ \text { Sales } & \$ 2,400,000 & \$ 2,400,000 \\ \text { Quality training } & 30,000 & 48,000 \\ \text { Material inspections } & 7,000 & 8,000 \\ \text { Scrap } & 48,000 & 30,00 \\ \text { Rework } & 60,000 & 48,000 \\ \text { Product inspection } & 10,000 & 12,000 \\ \text { Product warranty } & 36,000 & 24,000 \end{array}$ -Refer to the figure.For the current year,what percentage of sales are appraisal costs?

A) 0.333% B) 0.500% C) 0.833% D) 3.333% A) 0.333% B) 0.500% C) 0.833% D) 3.333%

As part of its environmental cost reporting system, Jesse Company tracks its total environmental costs. Consider the cost and sales data given: $\begin{array}{rrrr} \text { Year}&\text { Total Environmental Costs }&\text { Sales Revenue }&\text { Operating Costs }\\ \hline20 X 1 & \$ 7,500,000 & \$ 62,500,000 & \$ 50,000,000 \\ 20 X 2 & 6,250,000 & 62,500,000 & \$ 50,000,000 \\ 20 X 3 & 5,500,000 & 68,750,000 & \$ 50,000,000 \\ 20 X 4 & 4.812 .500 & 68.750,000 & \$ 50,000,000 \end{array}$ -Refer to the figure.What are the environmental costs as a percentage of sales for 20X2?

A) 10% B) 80% C) 100% D) 150% A) 10% B) 80% C) 100% D) 150%

Match between columns Premises: Auditing environmental activities Cleaning up contaminated soil Recycling scrap Evaluating and selecting suppliers Designing processes Testing for contamination Measuring contamination levels Losing a lake for recreational use Maintaining pollution equipment Recycling products

The Answer of E = External Failure and D = is...

Exam 16: Quality and Environmental Cost Management

Carlson Chemical produces a number of chemical products,two of which are Product A and Product B.The controller and environmental manager have identified the following environmental activities and costs associated with the two products: Product A Product B Kilograms produced 1,000,000 2,500,000 Packaging materials (kilograms) 300,000 150,000 Energy usage (kilowatt hours) 100,000 50,000 Toxic releases (kilograms into air) 250,000 50,000 Pollution control (machine hours) 40,000 10,000 Costs of activities: Using packaging materials \ 450,000 Using energy 120,000 Releasing toxins (fines) 60,000 Operating pollution control equipment 140,000 a.Calculate the environmental cost per kilogram for each product. b.Which of the two appears to cause the most degradation to the environment?

(Essay)

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(75)

Question 21

Opie Corporation reported the following operating costs and environmental quality costs for the past four years. Assume that all environmental quality costs are variable and that all changes in the quality cost ratios are due to an environmental cost reduction program. Quality Costs as Year Operatine Casts Percent of Operatine Casts 20X1 \ 3,000,000 25.0 20X2 3,100,000 23.0 20X3 3,200,000 21.0 20X4 3,300,000 20.0 -Refer to the figure.What is the change in environmental costs from 20X2 to 20X3?

(Multiple Choice)

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(73)

Question 22

At the beginning of the year,Randy 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: Preceding Year Current Year Sales \ 5,000,000 \ 5,000,000 Quality training 6,000 9,000 Material inspections 15,000 12,000 Scrap 80,000 60,000 Rework 15,000 12,000 Product inspection 25,000 30,000 Product warranty 150,000 120,000 a.Compute each category of quality costs as a percentage of sales for each year. Prevention costs Appraisal costs Internal failure costs External failure costs b.How much has profit increased as a result of quality improvements? c.If quality costs can be reduced to 2.5 percent of sales,how much additional profit would result?

(Essay)

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(81)

Question 23

Even under a zero-defects approach to quality,what types of quality costs will still remain?

(Multiple Choice)

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Question 24

In quality analysis,what does robustness mean?

(Multiple Choice)

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Question 25

In 2013,Shelby Foods instituted a quality improvement program.At the end of 2014,the management of the corporation requested a report to show the amount saved by the measures taken during the year.The actual sales and actual quality costs for 2013 and 2014 are as follows: 2013 2014 Sales \ 1,000,000 \ 1,500,000 Scrap 30,000 37,500 Rework 40,000 25,000 Training program 10,000 12,000 Consumer complaints 20,000 12,500 Lost sales, incorrect labelling 16,000 - Test labour 24,000 20,000 Inspection labour 50,000 60,000 Supplier evaluation 30,000 26,000 Shelby's management believes that quality costs can be reduced to 2.5 percent of sales within the next five years.At the end of Year 2014,Shelby's sales are projected to have grown to $1,500,000.The relative distribution of quality costs at the end of Year 2014 is as follows: Scrap 15\% Training 20\% Supplier evaluation 25\% Test labour 25\% Inspection 15\% Total quality costs 100\% a.Prepare a long-range performance report that compares the quality costs incurred at the end of 2014 with the quality-cost structure expected at the end of 2019. b.Are the targeted costs in Year 2014 all value-added costs? c.What would be the increase in profits in 2014 if the 2.5 percent performance standard is met in that year?

(Essay)

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Question 26

At the beginning of the year, John Corporation 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: Preceding Year Current Year Sales \ 2,000,000 \2 ,000,000 Quality training 2,000 3,000 Material inspections 5,00 8,000 Scrap 40,000 30,000 Rework 80,000 50,000 Product inspection 10,000 20,000 Product waranty 70,000 5,000 -Refer to the figure.For the current year,what percentage of sales are internal failure costs?

(Multiple Choice)

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Question 27

What type of cost are labour and overhead incurred for rework of defective products found by an inspector?

(Multiple Choice)

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Question 28

In activity-based management,which of the following quality costs would be considered non-value-added?

(Multiple Choice)

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Question 29

At the beginning of the year, Grant 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: Preceding 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 waranty 105,000 82,500 -Refer to the figure.For the current year,what percentage of sales are appraisal costs?

(Multiple Choice)

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(91)

Question 30

Roberts Corporation reported the following operating costs and environmental quality costs for the past four years.Assume that all environmental quality costs are variable and that all changes in the quality cost ratios are due to an environmental cost reduction program. Year Quality Costs as Operating Costs Percentage of Operating Cost 20X1 \ 4,000,000 24.0 20X2 4,100,000 22.0 20X3 4,200,000 20.0 20X4 4.300,000 18.0 What is the change in environmental costs from 20X1 to 20X2?

(Multiple Choice)

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Question 31

Which of the following is an important outcome of reporting environmental costs?

(Multiple Choice)

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Question 32

Which of the following uses customer surveys and interviews by sales personnel to estimate future profit losses?

(Multiple Choice)

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Question 33

What does quality mean and how has improving quality increased firm value?

(Essay)

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Question 34

At the beginning of the year, Andrew 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: Sales \ 2,400,000 \ 2,400,000 Quality training 30,000 48,000 Material inspections 7,000 8,000 Scrap 48,000 30,00 Rework 60,000 48,000 Product inspection 10,000 12,000 Product warranty 36,000 24,000 -Refer to the figure.For the current year,what percentage of sales are appraisal costs?

(Multiple Choice)

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Question 35

What is the total quality management standard that is used in the total quality approach?

(Multiple Choice)

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Question 36

As part of its environmental cost reporting system, Jesse Company tracks its total environmental costs. Consider the cost and sales data given: Year Total Environmental Costs Sales Revenue Operating Costs 20X1 \ 7,500,000 \ 62,500,000 \ 50,000,000 20X2 6,250,000 62,500,000 \ 50,000,000 20X3 5,500,000 68,750,000 \ 50,000,000 20X4 4.812.500 68.750,000 \ 50,000,000 -Refer to the figure.What are the environmental costs as a percentage of sales for 20X2?

(Multiple Choice)

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Question 37

What type of cost is downtime attributed to quality problems?

(Multiple Choice)

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Question 38

Using the abbreviations listed below,indicate for each of the costs whether the cost should be classified as:

Auditing environmental activities

E = External Failure

Cleaning up contaminated soil

D = Detection

Recycling scrap

P = Prevention

Correct Answer:

Verified

Auditing environmental activities

Cleaning up contaminated soil

Recycling scrap

Evaluating and selecting suppliers

Designing processes

(Matching)

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Question 39

As quality improves,how might savings be realized?

(Multiple Choice)

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Question 40

Even under a zero-defects approach to quality,what types of quality costs will still remain?

In quality analysis,what does robustness mean?

What type of cost are labour and overhead incurred for rework of defective products found by an inspector?

In activity-based management,which of the following quality costs would be considered non-value-added?

Which of the following is an important outcome of reporting environmental costs?

Which of the following uses customer surveys and interviews by sales personnel to estimate future profit losses?

What does quality mean and how has improving quality increased firm value?

What is the total quality management standard that is used in the total quality approach?

What type of cost is downtime attributed to quality problems?

As quality improves,how might savings be realized?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost Behaviour

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Responsibility Accounting,performance Evaluation,and Transfer Pricing

Tactical Decision Making

Pricing and Profitability Analysis

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Lean Accounting and Productivity Measurement

Inventory Management: Economic Order Quantity,jit,and the Theory of Constraints

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