Exam 4: Strategic Management of Costs,quality,and Time

Which of the following is not an example of appraisal costs?

Quality improvement.Trimline Frames makes bicycle frames in two processes,tubing and welding.The tubing process has a capacity of 50,000 units per year;welding has a capacity of 75,000 units per year.Cost information follows: The company enjoys high demand for its products.Trimline Frames can sell whatever output it can produce for the market price of $60 per frame.Trimline Frames can start only 50,000 units into production in the tubing department because of capacity constraints on the tubing machines.The company scraps all defective units produced in the tubing department.Of the 50,000 units started in the tubing operation,5,000 units (10 percent)are scrapped at the end of the production process.Scrap costs,based on total (fixed and variable)manufacturing costs incurred in the tubing operation,equal $38 per unit as follows: The "$10 fixed cost" is the portion of the total fixed costs of $500,000 allocated to each unit,whether good or defective.The good units from the tubing department are sent to the welding department.Variable manufacturing costs in the welding department are $3.00 per unit.There is no scrap in the welding department.Therefore,Trimline Frames' total sales quantity equals the tubing department's output.Trimline Frames incurs no other variable costs.Trimline Frames' designers have discovered that using a different type of material in the tubing operation would reduce scrap to zero,but it would increase the variable costs per unit in the tubing department by $1.50.Recall that only 50,000 units can be started each year. Required: a.What is the additional direct materials cost of implementing the new method? b.What is the additional benefit to Trimline Frames from using the new material and improving quality? c.Should Trimline Frames use the new materials? d.What other nonfinancial and qualitative factors should Trimline Frames consider in making the decision? (Designer Frames;Quality improvement. )

Three Dog Bite Company: Refer to Three Dog Bite Company.What are the total prevention costs?

Which is the best stage in the Value Chain to prevent quality problems?

Break-even time.Hampton Corporation's research and development department is presenting a proposal for new product research.The new product will require research,development,and design investments of $6 million (discounted cash flow).Sales will begin after four years and will generate an annual discounted net cash flow of $1.5 million starting in Year 3. Required: a.Calculate the break-even time for the new product. b.What can Hampton Corporation do to reduce break-even time? (Hampton Company;Breakeven time. )

On a balanced scorecard,the measure of the number of new patents developed through research and development would most likely be an example of a performance measure in the:

Quality improvement.Designer Frames makes bicycle frames in two processes,tubing and welding.The tubing process has a capacity of 40,000 units per year;welding has a capacity of 75,000 units per year.Cost information follows: The company enjoys high demand for its products.Designer Frames can sell whatever output it can produce for the market price of $53 per frame.Designer Frames can start only 50,000 units into production in the tubing department because of capacity constraints on the tubing machines.The company scraps all defective units produced in the tubing department.Of the 40,000 units started in the tubing operation,4,000 units (10 percent)are scrapped at the end of the production process.Scrap costs,based on total (fixed and variable)manufacturing costs incurred in the tubing operation,equal $35 per unit as follows: The "$10 fixed cost" is the portion of the total fixed costs of $400,000 allocated to each unit,whether good or defective.The good units from the tubing department are sent to the welding department.Variable manufacturing costs in the welding department are $2.00 per unit.There is no scrap in the welding department.Therefore,Designer Frames' total sales quantity equals the tubing department's output.Designer Frames incurs no other variable costs.Designer Frames' designers have discovered that using a different type of material in the tubing operation would reduce scrap to zero,but it would increase the variable costs per unit in the tubing department by $2.50.Recall that only 40,000 units can be started each year. Required: a.What is the additional direct materials cost of implementing the new method? b.What is the additional benefit to Designer Frames from using the new material and improving quality? c.Should Designer Frames use the new materials? d.What other nonfinancial and qualitative factors should Designer Frames consider in making the decision? (Designer Frames;Quality improvement. )

To support total quality management,__________ should collect the information and use it to get feedback and solve problems.

Define Break-even time (BET)and describe how it works.Include any limitations from using this approach. Break-even time (BET)is the length of time required to recover the investment made in new-product development.It is important to identify the relevant cash flows in break-even time analysis.The relevant cash flows are the differential future cash inflows and outflows that change as a result of introducing the new product.Overhead costs are irrelevant if adding a new product only changes the way overhead is allocated without changing the total cash outflow for overhead costs.Break-even time analysis should also include both positive and negative cash-flow effects that the new product may have on sales of existing products.

Describe ISO 9000 and comment on its importance.Also comment on other quality awards available.

A quality improvement program attempts to achieve zero defects while minimizing costs.Cost of quality reports do not explicitly report the

On the balanced scorecard,the measure of employee turnover would most likely be an example of a performance measure in the:

The time a company spends responding to customer requests which can be reduced by identifying the activities that consume the most resources and making them more efficient,and by identifying non-value-added activities,which the firm can eliminate,is called

Jamison Connelly has discovered a problem involving the mix of lye to the dry concrete mix that costs the company $20,500 in waste and $14,000 in lost business per period.There are two alternative solutions.The first is to lease a new mix regulator at a cost of $14,000 per period.The new regulator would save Jamison $14,500 in waste and $9,500 in lost business.The second alternative is to hire an additional employee to manually monitor the existing regulator at a cost of $12,000 per period.This would save Jamison $10,500 in waste and $8,500 in lost business per period. Required: Which alternative should Jamison choose? (Jamison Connelly;Quality versus costs. )

How do many management accountants measure waste in the organization?

What are the four quality costing categories? Include in your answer at least three examples for each category.

Trade-offs must be made in and among the prevention,appraisal,internal failure,and external failure costs in order to reduce total costs of quality over time.Over the long-term,what should the targeted level of defective units?

The ISO 14000 focuses on communicating the financial impact of

A current theme in business today is that "quality is free." Which of the following statements best exemplifies that theme?

Which of the following is an example of appraisal costs?