Question 1

Warranty repair cost is an example of which of the following?

Accepted Answer

A)  prevention costs 
B)  appraisal costs 
C)  internal failure costs 
D)  external failure costs

Question 2

Premier Corp expects to spend $801,000 in 2017 in appraisal costs if it does not change its incoming materials inspection method. If it decides to implement a new receiving method, it will save $60,300 in fixed appraisal costs and variable costs of $0.50 per unit of finished product. The new method involves $150,000 in training costs and an additional $157,000 in annual equipment rental.
Internal failure costs average $180 per failed unit of finished goods. During 2014, 4% of all completed items had to be reworked. External failure costs average $400 per failed unit. The company's average external failures are 3% of units sold. The company carries no ending inventories, because all jobs are on a per order basis and a just-in-time inventory ordering method is used.
How much will external failure costs change assuming 810,000 units of materials are received and that product failures with customers are cut in half with the new receiving method?

Accepted Answer

A)  $16,020 increase 
B)  $4,860,000 decrease 
C)  $2,187,000 decrease 
D)  $9,720,000 decrease

Question 3

What are control charts and how can inferences be drawn from them?

Accepted Answer

The answer of What are control charts and how can...

Question 4

What is it that a statistical quality control chart does?

Accepted Answer

A)  it shows a graph of a series of random events of a process 
B)  it plots each observation relative to specified ranges that represent the expected distribution 
C)  it plots control observations over various periods of time 
D)  it plots only those observations outside specified limits

Question 5

Distribution of questionnaires to customers regarding product quality and improving the product on certain key areas based on the inferences drawn from the questionnaires is an example of a nonfinancial measure of quality.

Accepted Answer

A) True 
 B)False

Question 6

Longer manufacturing cycle times increase the inventory carrying costs and decrease revenues.

Accepted Answer

A) True 
 B)False

Question 7

Rework is an example of ________.

Accepted Answer

A)  prevention costs 
B)  appraisal costs 
C)  internal failure costs 
D)  external failure costs

Question 8

Tran-North American Industries Inc. is looking at a change in its manufacturing process that will cause manufacturing cycle time to increase from 250 hours to 425 hours. The increase in the manufacturing time will result in an estimated loss in revenues of $19,000. Carrying costs are estimated at $2.00 per hour and the controller estimates that 44 orders for raw materials are expected for the year. What is the expected change in revenues as a result of the increase in manufacturing cycle time? (Round the final answer to the nearest whole dollar.)

Accepted Answer

A)  $34,400 
B)  $37,400 
C)  $19,000 
D)  $3000

Question 9

Cost of Quality (COQ) reports provide more insight about quality improvements and allow managers to compare trends over time.

Accepted Answer

A) True 
 B)False

Question 10

Ventaz Corp manufactures small windows for back yard sheds. Historically, its demand has ranged from 30 to 50 windows per day with an average of 43. Alex is the one production worker and he works eight hours a day, five days a week. Each order is one window and each window takes 7 minutes. Alex plans to add doors to its product line and anticipates that they will average 2 doors per day. Each door takes V4 minutes to install.
What is the average waiting time, in minutes, if Alex continues to be the only worker?

Accepted Answer

A)  220 minutes 
B)  289 minutes 
C)  241 minutes 
D)  963 minutes

Question 11

Monticello Corp manufactures expensive tables. Its varnishing department is fully automated and requires substantial inspection to keep the machines operating properly. An improperly varnished table is very expensive to correct. Inspection hours for the 5800 tables varnished in September totaled 1700 hours by 10 employees. Eight quarts of varnish were used, on average, for each table. The standard amount of varnish per table is nine quarts. The cost of inspection for September was equal to the budgeted amount of $40,100.
The $40,100 represents a(n) ________.

Accepted Answer

A)  activity cost pool 
B)  possible cost allocation base 
C)  internal failure cost 
D)  work-in-process control

Question 12

Which of the following is a learning-and-growth measure to study the output during bottleneck situations?

Accepted Answer

A)  manufacturing cycle efficiency for key processes 
B)  carrying cost of inventories 
C)  number of employees trained to manage bottlenecks 
D)  improve customer-response time during bottlenecks

Question 13

Cysco Corp has a budget of $1,210,000 in 2017 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $108,000 in variable costs. The new method will require $50,400 in training costs and $145,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 206,000 units.
Appraisal costs for the year are budgeted at $510,000. The new prevention procedures will save appraisal costs of $50,600. Internal failure costs average $32 per failed unit of finished goods. The internal failure rate is expected to be 4% of all completed items. The proposed changes will cut the internal failure rate by one-half. Internal failure units are destroyed. External failure costs average $50 per failed unit. The company's average external failures average 2.7% of units sold. The new proposal will reduce this rate to 1%. Assume all units produced are sold and there are no ending inventories.
How much will internal failure costs change if the internal product failures are reduced by 40% with the new procedures?

Accepted Answer

A)  $151,360 decrease 
B)  $134,400 decrease 
C)  $105,472 decrease 
D)  $87,000 increase

Question 14

Manufacturing Cycle Efficiency (MCE) = Value-added Manufacturing Time divided by Manufacturing Cycle Time.

Accepted Answer

A) True 
 B)False

Question 15

Product testing is an example of ________.

Accepted Answer

A)  prevention costs 
B)  appraisal costs 
C)  internal failure costs 
D)  external failure costs

Question 16

Norton's Convenience store has a variable demand. The daily demand ranges from 270 to 330 customers a day who average purchasing 5 items each. The average daily demand is 300 customers. The convenience store currently operates 12 hours a day. Each order takes approximately 2 minutes.
Required:
a.What is the average customer waiting time, in minutes?
b.What is the cycle time for an order?
c.Norton has decided that the waiting time is too long and has increased the hours the store is open to 15 hours. What is the waiting time now?

Accepted Answer

The answer of Norton's Convenience store has a variable demand....

Question 17

Process engineering is an example of ________.

Accepted Answer

A)  prevention costs 
B)  appraisal costs 
C)  internal failure costs 
D)  external failure costs

Question 18

Process engineering is an example of ________.

Accepted Answer

A)  prevention costs 
B)  appraisal costs 
C)  internal failure costs 
D)  external failure costs

Question 19

Which of the following is considered a cost of quality?

Accepted Answer

A)  external failure costs 
B)  opportunity costs 
C)  sunk costs 
D)  contingent liabilities

Question 20

Cost of quality financial measures will usually deteriorate when nonfinancial measures of quality are emphasized and improved.

Accepted Answer

A) True 
 B)False

Exam 19: Balanced Scorecard: Quality and Time

Warranty repair cost is an example of which of the following?

What are control charts and how can inferences be drawn from them?

What is it that a statistical quality control chart does?

Distribution of questionnaires to customers regarding product quality and improving the product on certain key areas based on the inferences drawn from the questionnaires is an example of a nonfinancial measure of quality.

Longer manufacturing cycle times increase the inventory carrying costs and decrease revenues.

Rework is an example of ________.

Cost of Quality (COQ) reports provide more insight about quality improvements and allow managers to compare trends over time.

Which of the following is a learning-and-growth measure to study the output during bottleneck situations?

Manufacturing Cycle Efficiency (MCE) = Value-added Manufacturing Time divided by Manufacturing Cycle Time.

Product testing is an example of ________.

Process engineering is an example of ________.

Process engineering is an example of ________.

Which of the following is considered a cost of quality?

Cost of quality financial measures will usually deteriorate when nonfinancial measures of quality are emphasized and improved.