Exam 14: Quality and Environmental Cost Management

A quality cost report lists costs for each item within each of four categories.

Figure 14-2 At the beginning of the year, Devonshire 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: -Refer to Figure 14-2. For the current year, appraisal costs are what percentage of sales?

The predetermined amount of defective product that a company permits to be sold is called:

Hannibal Company produces a number of chemical products, two of which are Product X1 and Product X2. The controller and environmental manager have identified the following environmental activities and costs associated with the two products: What is the packing cost per unit of Product X1?

A defective product is one that does NOT

Figure 14-2 At the beginning of the year, Devonshire 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: -Refer to Figure 14-2. For the current year, prevention costs are what percentage of sales?

In activity-based management, which quality cost would be considered value-added?

cost information is used to evaluate overall performance of quality improvement programs.

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

Activity-based costing facilitates environmental costing by tracing costs to the responsible products.

When defining environmental costs, damage is defined as

Maroone 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. What is the change in environmental costs from 2016 to 2017?

A measure of how well requirements are met by a product is called .

A report lists quality costs for each product within four quality cost categories.

Costs which exist because poor quality may or does exits are called .

An environmental benefits report would NOT contain

There are three categories of environmental costs: prevention, internal failure, and external failure.

In 2016, Exceptional Foods instituted a quality improvement program. At the end of 2017, 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 2016 and 2017 are as follows: Exceptional'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 2017, Exceptional's sales are projected to have grown to $1,500,000. The relative distribution of quality costs at the end of Year 2017 is as follows: Required: a. Prepare a long-range performance report that compares the quality costs incurred at the end of 2017 with the quality-cost structure expected at the end of 2020. b. Are the targeted costs in Year 2017 all value-added costs? c. What would be the increase in profits in 2017 if the 2.5 percent performance standard is met in that year?

If costs of quality were evaluated accurately, they would range in the 2 to 4 percent of sales range.

ISO 9000 is a set of international quality standards which are adopted by companies.