In 2013,Style,Inc.,instituted a quality improvement program.At the end of 20X4,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 20X3 and 20X4 are as follows: $\begin{array}{lrr}&20X3&20X4\\ \text { Sales } & \$ 125,000 & \$ 150,000 \\ \text { Scrap } & 3,750 & 3,750 \\ \text { Rework } & 5,000 & 2,500 \\ \text { Training program } & 1,250 & 1,500 \\ \text { Consumer complaints } & 2,500 & 1,250 \\ \text { Lost sales, incorrect labelling } & 2,000 &- \\ \text { Test labour } & 3,000 & 2,000 \\ \text { Inspection labour } & 6,250 & 6,000 \\ \text { Supplier evaluation } & 3,750 & 3,250 \end{array}$ a.Classify each cost as variable or fixed with respect to sales and compute the variable cost ratio for 2013.Be careful-costs may change because of quality improvement,not cost behaviour. b.How much did profits increase because of quality improvements made in 2014,assuming all reductions in quality costs are attributable to quality improvements? c.Prepare an interim trend quality costs report for Style,Inc.

\[\begin{array} { l l } \text { a. Scra

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 20X1 to 20X2?

A) $12,000 B) $37,000 C) $41,000 D) $750,000 A) $12,000 B) $37,000 C) $41,000 D) $750,000

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. \[\begin{array}{l} &\text { Quality Costs as }\\ \text { Year }&\text { Operatine Casts } & \text { Percent of Operatine Cast } \\ \hline20 \mathrm{X} 1& \text { 44,000,000 } & 24.0 \\ 20 \mathrm{X} 2&4,100,000 & 22.0 \\ 20 \mathrm{X} 3&4,200,000 & 20.0 \\ 20 \mathrm{X} 4&4,300,000 & 18.0 \end{array}\] -Refer to the figure.What is the change in environmental costs from 20X2 to 20X3?

A) $58,000 B) $62,000 C) $840,000 D) $902,000 A) $58,000 B) $62,000 C) $840,000 D) $902,000

At the beginning of the year, Jim Jackson 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: $\begin{array}{lrr} &\underline{\text { Preceding Year }} & \underline{\text { Current Year}}\\ \text { Sales } & \$ 2,400,000 & \$ 2,000,000 \\ \text { Scrap } & 40,000 & 30,000 \\ \text { Rework } & 100,000 & 70,000 \\ \text { Product inspection } & 12,000 & 18,000 \\ \text { Quality training } & 4,000 & 5,000 \\ \text { Material inspections } & 8,000 & 13,000 \\ \text { Product warranty } & 80,000 & 50,000 \end{array}$ -Refer to the figure.For the current year,what percentage of sales are internal failure costs?

A) 2.50% B) 5.00% C) 7.50% D) 9.30% A) 2.50% B) 5.00% C) 7.50% D) 9.30%

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, 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 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%

As part of its environmental cost reporting system,Jackson Company tracks its total environmental costs.Consider the cost and sales data given: $\begin{array}{rrrr} \text { Year}&\text { Total Environmental Costs }&\text { Sales Revenue }&\text { Operating Costs }\\ \hline20 \mathrm{X} 1 & \$ 3,750,000 & \$ 31,250,000 & \$ 25,000,000 \\ 20 \mathrm{X} 2 & 3,125,000 & \$ 31,250,000 & \$ 25,000,000 \\ 20 \mathrm{X} 3 & 2,750,000 & \$ 31,250,000 & \$ 25,000,000 \\ 20 \mathrm{X} 4 & 2,406.250 & \$ 31.250,000 & \$ 25,000,000 \end{array}$ What are the environmental costs as a percentage of sales for 20X1?

A) 8.33% B) 12% C) 15% D) 80% A) 8.33% B) 12% C) 15% D) 80%

The following information pertains to Kanyon, Inc., for the current year: \[\begin{array} { l r } \text { Sales } & \$ 2,000,000 \\ \text { Internal failure costs } & 250,000 \\ \text { External failure costs } & 100,000 \\ \text { Appraisal costs } & 70,000 \\ \text { Prevention costs } & 50,000 \\ \text { Cost af goods sold } & 750,000 \end{array}\] -Refer to the figure.If quality costs were reduced to 2.5 percent of sales,by how much would profits increase?

A) $250,000 B) $300,000 C) $420,000 D) $500,000 A) $250,000 B) $300,000 C) $420,000 D) $500,000

At the beginning of the year, Grant Company initiated an environmental cost reduction program. To help assess the impact of the environmental cost reduction improvement program, the following data were collected for the current and preceding year: $\begin{array}{lrr} & \underline{\text {Preceding Year}}& \underline{\text {Current Year}}\\ \text { Operating costs } & \$ 3,000,000 & \$ 3,000,000 \\ \text { Designing products } & 3,000 & 4,500 \\ \text { Auditing environmental activities } & 7,500 & 12,000 \\ \text { Recycling scrap } & 60,000 & 45,000 \\ \text { Disposing of toxic waste } & 120,000 & 75,000 \\ \text { Testing for contamination } & 15,000 & 30,000 \\ \text { Cleaning up oil spills } & 105,000 & 82,500 \end{array}$ -Refer to the figure.For the current year,what percentage of operating costs are prevention costs?

A) 0.05% B) 0.15% C) 0.65% D) 1.50% A) 0.05% B) 0.15% C) 0.65% D) 1.50%

The following information pertains to Stan Corporation for the current year: $\begin{array}{llc} \text { Designing processes for environment } & \$ 250,000 \\ \text { Testing for contamination } & \$ 1,500,000 \\ \text { Cleaning up soil after contamination } & \$ 1,500,000 \\ \text { Operating pollution control equipment } & \$ 400,000 \\ \text { Measuring contamination levels } & \$ 15000,000 \\ \text { Total operating costs } & \$ 15,000,000 \end{array}$ Environmental external failure costs amount to what percentage of total operating costs?

A) 10% B) 17.33% C) 30% D) 15% A) 10% B) 17.33% C) 30% D) 15%

At the beginning of the year,London,Inc.initiated an environmental cost reduction program.To help assess the impact of the environmental cost reduction improvement program,the following data was collected for the current and preceding year: $\begin{array}{lr} & \underline{\text { Preceding Year }}\\ \text { Operating costs } & \$ 2,000,000 \\ \text { Cost reduction, contaminants (ongoing) } & 150,000 \\ \text { Designing products } & 8,000 \\ \text { Auditing environmental risks } & 10,000 \\ \text { Recycling scrap } & 50,000 \\ \text { Recycling income } & 100,000 \\ \text { Restoring land to natural state } & 60,000 \\ \text { Operating pollution control equipment } & 50,000 \\ \text { Packaging cost reductions (current year) } & 120,000 \\ \text { Testing for contamination } & 80,000 \end{array}$ a.Prepare an environmental financial statement for the year.

The answer of At the beginning of the year,London,Inc.initiated an...

Exam 16: Quality and Environmental Cost Management

In 2013,Style,Inc.,instituted a quality improvement program.At the end of 20X4,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 20X3 and 20X4 are as follows: 20X3 20X4 Sales \ 125,000 \ 150,000 Scrap 3,750 3,750 Rework 5,000 2,500 Training program 1,250 1,500 Consumer complaints 2,500 1,250 Lost sales, incorrect labelling 2,000 - Test labour 3,000 2,000 Inspection labour 6,250 6,000 Supplier evaluation 3,750 3,250 a.Classify each cost as variable or fixed with respect to sales and compute the variable cost ratio for 2013.Be careful-costs may change because of quality improvement,not cost behaviour. b.How much did profits increase because of quality improvements made in 2014,assuming all reductions in quality costs are attributable to quality improvements? c.Prepare an interim trend quality costs report for Style,Inc.

(Essay)

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Question 101

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 20X1 to 20X2?

(Multiple Choice)

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(85)

Question 102

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. Quality Costs as Year Operatine Casts Percent of Operatine Cast 201 44,000,000 24.0 202 4,100,000 22.0 203 4,200,000 20.0 204 4,300,000 18.0 -Refer to the figure.What is the change in environmental costs from 20X2 to 20X3?

(Multiple Choice)

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Question 103

Randall 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 Costsas Year Sales Revenues Percent of Revenues 1 \ 2,000,000 23.0\% 2 2,200,000 20.0\% 3 2,200,000 16.0\% 4 2,400,000 12.0\% a.Compute the quality costs for all four years. b.How much did net income increase from Year 1 to Year 2 because of quality improvements? From Year 2 to Year 3? From Year 3 to Year 4? c.The management of Randall 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 facing Randall.

(Essay)

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Question 104

At the beginning of the year, Jim Jackson 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 \ 2,000,000 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 Product warranty 80,000 50,000 -Refer to the figure.For the current year,what percentage of sales are internal failure costs?

(Multiple Choice)

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Question 105

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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Question 106

What is the term for a quality performance report that compares the actual quality costs for a period to the budgeted quality costs for the period?

(Multiple Choice)

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Question 107

What type of activity is developing environmental performance measures?

(Multiple Choice)

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Question 108

What type of cost are inspection labour costs classified as?

(Multiple Choice)

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Question 109

Which of the following is a monetary incentive?

(Multiple Choice)

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Question 110

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 internal failure costs?

(Multiple Choice)

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Question 111

What is the term for a graph that plots quality costs against time?

(Multiple Choice)

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Question 112

As part of its environmental cost reporting system,Jackson Company tracks its total environmental costs.Consider the cost and sales data given: Year Total Environmental Costs Sales Revenue Operating Costs 201 \ 3,750,000 \ 31,250,000 \ 25,000,000 202 3,125,000 \ 31,250,000 \ 25,000,000 203 2,750,000 \ 31,250,000 \ 25,000,000 204 2,406.250 \ 31.250,000 \ 25,000,000 What are the environmental costs as a percentage of sales for 20X1?

(Multiple Choice)

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Question 113

The following information pertains to Kanyon, Inc., for the current year: Sales \ 2,000,000 Internal failure costs 250,000 External failure costs 100,000 Appraisal costs 70,000 Prevention costs 50,000 Cost af goods sold 750,000 -Refer to the figure.If quality costs were reduced to 2.5 percent of sales,by how much would profits increase?

(Multiple Choice)

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Question 114

At the beginning of the year, Grant Company initiated an environmental cost reduction program. To help assess the impact of the environmental cost reduction improvement program, the following data were collected for the current and preceding year: Operating costs \ 3,000,000 \ 3,000,000 Designing products 3,000 4,500 Auditing environmental activities 7,500 12,000 Recycling scrap 60,000 45,000 Disposing of toxic waste 120,000 75,000 Testing for contamination 15,000 30,000 Cleaning up oil spills 105,000 82,500 -Refer to the figure.For the current year,what percentage of operating costs are prevention costs?

(Multiple Choice)

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Question 115

The following information pertains to Stan Corporation for the current year: Designing processes for environment \ 250,000 Testing for contamination \ 1,500,000 Cleaning up soil after contamination \ 1,500,000 Operating pollution control equipment \ 400,000 Measuring contamination levels \ 15000,000 Total operating costs \ 15,000,000 Environmental external failure costs amount to what percentage of total operating costs?

(Multiple Choice)

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Question 116

For which decisions do managers need quality cost information?

(Multiple Choice)

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Question 117

According to the robust view,the strategy for reducing quality costs is based on which assumption?

(Multiple Choice)

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Question 118

Lower sales due to poor product performance is an example of which type of cost?

(Multiple Choice)

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Question 119

At the beginning of the year,London,Inc.initiated an environmental cost reduction program.To help assess the impact of the environmental cost reduction improvement program,the following data was collected for the current and preceding year: Operating costs \ 2,000,000 Cost reduction, contaminants (ongoing) 150,000 Designing products 8,000 Auditing environmental risks 10,000 Recycling scrap 50,000 Recycling income 100,000 Restoring land to natural state 60,000 Operating pollution control equipment 50,000 Packaging cost reductions (current year) 120,000 Testing for contamination 80,000 a.Prepare an environmental financial statement for the year.

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Question 120

What is the term for a quality performance report that compares the actual quality costs for a period to the budgeted quality costs for the period?

What type of activity is developing environmental performance measures?

What type of cost are inspection labour costs classified as?

Which of the following is a monetary incentive?

What is the term for a graph that plots quality costs against time?

For which decisions do managers need quality cost information?

According to the robust view,the strategy for reducing quality costs is based on which assumption?

Lower sales due to poor product performance is an example of which type of cost?

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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