Deck 14: Quality and Environmental Cost Management

Question 1

Managers use interim quality standards to express quality goals on an interim basis.

Answer 1

True

Question 2

In a quality cost report, quality costs are expressed as a percentage of total defective units.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

According to the robust view, a gain is experienced from varying a product target value.

Question 5

A multiple-period quality trend report is a chart or graph that tracks changes in quality.

Question 6

Cost-volume-profit analysis relies on analysis of fixed and variable costs.

Question 7

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

Question 8

The long-range quality performance report compares actual with final quality costs.

Question 9

Cost information is important to managers, to help them improve managerial planning, control, and decision making.

Question 10

Continuous auditing of suppliers assures the commitment to continuous improvement by ISO 9000 certified companies.

Question 11

Customers are concerned with product reliability, durability, fitness for use, and conformance to specifications.

Question 12

Activity-based costing is used to calculate the quality cost per unit of a company's products.

Question 13

Internal failure costs incurred by failure of products to conform to specifications are discovered after sales take place.

Question 14

The two types of quality performance reports are interim standard and long-range reports.

Question 15

Quality cost performance reports contain two essential elements: actual and expected outcomes.

Question 16

The zero-defects model claims that it is cost beneficial to reduce nonconforming units to zero.

Question 17

The decision making contexts related to quality cost information are strategic pricing and strategic analysis.

Question 18

A quality product or service is one that meets or exceeds customer expectations.

Question 19

Prevention costs are incurred to prevent poor quality in products or services being produced.

Question 20

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

Question 21

Environmental costs of production and post-purchase costs are examples of environmental product costs.

Question 22

Costs incurred and paid for by the company are called __________ costs.

Question 23

__________ analysis relies in the analysis of fixed and variable costs together with cost.

Question 24

Full private costing is the assignment of all environmental costs, private and societal, to products.

Question 25

Ecoefficiency is the ability to produce goods while reducing the impact on the environment.

Question 26

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

Question 27

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

Question 28

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

Question 29

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

Question 30

The assignment of costs to environmental activities yields activity rates which are then used to assign costs to products.

Question 31

Environmental costs involves the damage to the environment by inefficient use of materials and energy.

Question 32

The environmental cost report contains information on the impact of environmental costs of profitability, and amounts spent on each category of activities.

Question 33

A multi-year trend graph showing direction and magnitude of change since the implementation of a total quality program is called the __________ report.

Question 34

The predetermined allowable amount of defective product allowed to be sold is called __________.

Question 35

Environmental costs caused internally but paid by outside parties are called __________ costs.

Question 36

The environmental financial statement compares benefits produced with environmental costs within a period.

Question 37

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

Question 38

The __________ report is used to evaluate budgeted quality costs goals.

Question 39

Full environmental costing is the assignment of only private costs to individual products.

Question 40

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

Question 41

Which of the following is a correct meaning(s)for the term zero defects?

A)all products conform to specifications
B)there are no unusable products
C)all products are usable or can be reworked
D)all of the above

Question 42

The costs incurred because poor quality may or does exist are called:

A)Internal failure costs
B)Costs of quality
C)External failure costs
D)Appraisal costs

Question 43

From the operational content view, a quality product or service is one that meets or exceeds

A)customer expectations.
B)customer satisfaction.
C)company targets.
D)company standards.

Question 44

An example of a prevention cost is

A)field testing.
B)quality audits.
C)reinspection.
D)repair costs.

Question 45

Which of the following statements is true about the robust quality view?

A)It means exact conformance to a target value.
B)It allows a minimum level of tolerance.
C)It allows 2 to 4 percent of variation from a given quality characteristic.
D)It follows the traditional range of conformance to quality specification.

Question 46

The assignment of private and societal costs to products is called __________ costing.

Question 47

Environmental cost redesign would not be a part of an __________ report.

Question 48

In-process inspection is a(n)

A)external failure cost.
B)internal failure cost.
C)appraisal cost.
D)prevention cost.

Question 49

Improving quality is an important competitive issue for

A)manufacturing firms only.
B)service firms only.
C)supplying firms only.
D)all firms.

Question 50

Quality training programs are classified as

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

Question 51

The lowest environmental costs are attainable at the __________ point.

Question 52

The assignment of only private costs to individual products is called __________ costing.

Question 53

Which of the following is NOT a dimension of quality?

A)performance
B)durability
C)reliability
D)all of the above are dimensions of quality.

Question 54

Quality experts indicate that optimal quality costs should be:

A)2 to 4 percent of sales.
B)2 to 4 percent of operating expenses.
C)2 to 4 percent of profit.
D)0 percent.

Question 55

The cost of processes which produce, market, delivers, and dispose of products are called __________ costs.

Question 56

The measure of how well a product meets its requirements or specifications is called:

A)Service quality
B)Quality of design
C)Quality of conformance
D)Taguchi quality loss function

Question 57

Costs incurred to determine whether products and services are conforming to requirements are called

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

Question 58

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

A)Zero defects
B)Kaizen
C)Acceptable quality level
D)Taguchi quality loss function

Question 59

Improving quality can increase firm value because

A)firms can increase activities.
B)firms can increase costs.
C)firms can increase customer demand.
D)all of the above.

Question 60

A defective product is one that does NOT

A)appeal to customers.
B)pass inspection.
C)satisfy customers.
D)conform to specifications.

Question 61

The method which assumes that the total failure cost is some multiplier of measured failure costs is called:

A)Taguchi quality loss function
B)Market research method
C)Process acceptance sampling
D)Multiplier method

Question 62

Inspection labor costs are classified as

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

Question 63

Assume the multiplier method is used and the multiplier is determined to be 3 based on experience. Accounting records show that the measured external failure costs are $400,000. Then the hidden external failure costs are estimated to be

A)$133,334.
B)$400,000.
C)$800,000.
D)$1,200,000.

Question 64

Multiple methods of estimating hidden quality costs do NOT include the

A)multiplier method.
B)market research method.
C)process acceptance sampling.
D)Taguchi quality loss function.

Question 65

Product inspection is a(n)

A)external failure cost.
B)internal failure cost.
C)appraisal cost.
D)prevention cost.

Question 66

Product recalls are

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

Question 67

Reinspection of reworked products is a(n)

A)external failure cost.
B)internal failure cost.
C)appraisal cost.
D)prevention cost.

Question 68

Phillips Screw Company produces screw fittings. It is determined that T = 1 inch in diameter. Specification limits allow a variation of plus or minus 0.5 inches. Products produced at values beyond the specification limits lose $15. A sample of five units produced showed the following values: $$\begin{array} { l c } \text { Unit Number } & \text { Actual Diameter (Y) } \\\text { Unit } 1 & 1.2 \\\text { Unit 2 } & 1.3 \\\text { Unit 3 } & 0.8 \\\text { Unit } 4 & 0.9 \\\text { Unit } 5 & 1.0\end{array}$$ What is the cost of hidden loss for production of 50,000 units?

A)$34,722
B)$90,000
C)$108,000
D)$300,000

Question 69

Phillips Screw Company produces screw fittings. It is determined that T = 1 inch in diameter. Specification limits allow a variation of plus or minus 0.5 inches. Products produced at values beyond the specification limits lose $15. A sample of five units produced showed the following values: $$\begin{array} { l c } \text { Unit Number } & \text { Actual Diameter (Y) } \\\text { Unit } 1 & 1.2 \\\text { Unit 2 } & 1.3 \\\text { Unit 3 } & 0.8 \\\text { Unit } 4 & 0.9 \\\text { Unit } 5 & 1.0\end{array}$$ What is the average loss per unit?

A)$12.00
B)$10.80
C)$2.61
D)$2.16

Question 70

The method which assumes that variation from target values of a quality characteristic causes hidden quality costs is called:

A)Multiplier method
B)Market research method
C)Taguchi quality loss function
D)Process acceptance sampling

Question 71

Downtime attributed to quality problems is a(n)

A)external failure cost.
B)internal failure cost.
C)appraisal cost.
D)prevention cost.

Question 72

The costs of a consumer complaint department are

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

Question 73

Lower sales due to poor product performance is an example of

A)a prevention cost.
B)an internal failure cost.
C)an appraisal cost.
D)external failure costs.

Question 74

Labor and overhead incurred for rework of defective products found by an inspector is a(n)

A)external failure cost.
B)internal failure cost.
C)appraisal cost.
D)prevention cost.

Question 75

Costs incurred because products or services fail to meet requirements after delivery to customers are called

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

Question 76

Azure Company uses the multiplier method to estimate hidden quality costs. The multiplier is determined to be 3, based on experience. Accounting records show that the measured external failure costs are $330,000. Which of the following is the total external failure cost?

A)$330,000
B)$110,000
C)$990,000
D)$339,900

Question 77

The method that uses customer surveys and interviews by sales personnel to estimate future profit losses.

A)Multiplier method
B)Taguchi quality loss function
C)Market research method
D)Process acceptance sampling method

Question 78

Phillips Screw Company produces screw fittings. It is determined that T = 1 inch in diameter. Specification limits allow a variation of plus or minus 0.5 inches. Products produced at values beyond the specification limits lose $15. A sample of five units produced showed the following values: $$\begin{array} { l c } \text { Unit Number } & \text { Actual Diameter (Y) } \\\text { Unit } 1 & 1.2 \\\text { Unit 2 } & 1.3 \\\text { Unit 3 } & 0.8 \\\text { Unit } 4 & 0.9 \\\text { Unit } 5 & 1.0\end{array}$$ What is k, the constant, in the Taguchi loss function?

A)$60
B)$2.5
C)$5.2
D)$0.5

Question 79

Warranty work is a(n)

A)external failure cost.
B)internal failure cost.
C)appraisal cost.
D)prevention cost.

Question 80

Observable quality costs

A)are costs of defects that can be seen.
B)are those available in the accounting records.
C)are costs of defective units that get to customers.
D)include all costs of quality.