Deck 27: Quality Management and Measurement

Question 1

Total quality management requires all business functions to work together to ensure product quality.

Answer 1

True

Question 2

As a consequence of many manufacturing firms attempting to reduce the number of suppliers with which they deal,vendors that do not supply products with high quality and reliable delivery schedules may expect to be forced out of business.

Answer 2

True

Question 3

The key to good quality control is to have periodic inspection points staffed by qualified quality control personnel.

Answer 3

False

Question 4

As a consequence of many manufacturing firms attempting to reduce the number of suppliers with which they deal,vendors that supply high-quality products and reliable delivery schedules may expect increased business.

Question 5

The first step in ensuring the production of high-quality products is to have a sound product design.

Question 6

Low costs of conformance usually result in high costs of nonconformance.

Question 7

The key to good quality control is to evaluate quality early enough so that changes are made before the product is sold.

Question 8

Traditional management information systems focus on financial reporting.

Question 9

A management information system is not designed to provide data about individual customers.

Question 10

Total quality management seeks continuous improvement on product quality and analyzes performance using nonfinancial measures.

Question 11

The primary focus of a management information system is management of costs.

Question 12

External failure costs are the costs incurred after the product is shipped or the service is delivered to the customer.

Question 13

Many traditional management information systems do not produce meaningful results for today's business environment.

Question 14

A management information system can be designed to support many different types of management philosophies.

Question 15

Internal failure costs and prevention costs make up the costs of conformance.

Question 16

Cost control concerns have largely been replaced with concern for nonfinancial measures in JIT settings.

Question 17

Reducing the costs of quality and increasing overall product quality can be achieved simultaneously.

Question 18

The last step in ensuring the production of high-quality products is to have a sound product design.

Question 19

Traditionally,the point of sale and shipment of a product has ended the management accountant's responsibility with respect to the product.In a new manufacturing environment,the measure of customer satisfaction may be an accounting responsibility too.

Question 20

The two components of costs of quality are costs of conformance and costs of nonconformance.

Question 21

Quality costs of conformance and costs of nonconformance are related to each other

A) rarely.
B) directly.
C) indirectly.
D) inversely.

Question 22

Quality in manufacturing simply means a product has to be dependable and free of defects.

Question 23

The Six Sigma quality standard was used by Motorola to improve its performance.

Question 24

The organization that promotes improvement in quality worldwide is called the International Organization for Standardization.

Question 25

In the new manufacturing environment,the point of sale and shipment of a product ends the management accountant's responsibility with respect to the product.

Question 26

At present,very few countries belong to the ISO.

Question 27

Service businesses cannot measure the quality of their work.

Question 28

The Deming Application Prize for quality originated in Japan.

Question 29

Though focus on quality is considered a modern management issue,the Deming Application Prize actually originated in 1951.

Question 30

Which of the following is not an example of a conformance cost?

A) Prevention cost
B) Appraisal cost
C) Quality engineering cost
D) External failure cost

Question 31

Benchmarking and process mapping are two methods to measure quality.

Question 32

How does an ERP system differ from an MIS?

A) The ERP system informally links the different areas of management for specific purposes.
B) There is no difference.
C) The ERP system combines all areas of management into one centralized data warehouse.
D) The ERP system can be used only in a service business.

Question 33

The overall objective of controlling the costs of quality is to eliminate

A) appraisal costs.
B) costs of nonconformance.
C) costs of conformance.
D) the costs of quality.

Question 34

Managers' concerns about the quality of a product or service include customer defections.

Question 35

Maxine Lavon is the controller for Prater Industries.She has been asked to develop a plan for installing a management information system in her company.She will need to do all of the following to help managers except

A) evaluate.
B) perform.
C) repeat.
D) plan.

Question 36

The Malcolm Baldrige Quality Award was created by the U.S.Congress.

Question 37

The primary focus of a management information system is on the management of

A) people.
B) costs.
C) activities.
D) time.

Question 38

Information captured by a management information system allows managers to do all of the following except

A) determine accurate product or service costs.
B) improve processes.
C) provide timely feedback.
D) satisfy all customer inquiries.

Question 39

The Baldrige performance criteria focus on a single aspect of quality.

Question 40

Which of the following is a good indicator of management's strong commitment to product quality?

A) Product recalls increased as a percentage of sales
B) Nonconformance costs increased as a percentage of total quality costs
C) Customer service costs reduced by 70 percent over the previous year
D) High costs of conformance to quality

Question 41

Internal reports on quality at the Acme Publishing Company generated the following information for the Trade Division for the first three months of the year: $\begin{array}{lr}\text { Total sales } & \$ 1,000,000 \\\text { Costs of quality: } & \\\text { Prevention } & 44,000 \\\text { Appraisal } & 47,000 \\\text { Internal failure } & 36,000 \\\text { External failure } & 64,000\end{array}$
Compute the total costs of quality as a percentage of sales.

A) 2.4%
B) 4.4%
C) 12.6%
D) 19.1%

Question 42

Erin Stover has been appointed chief accountant for Dancer Industries.The company has three divisions that manufacture floor tiles.The industry is very competitive,and Dancer Industries has lost market share in each of the last four years.Three years ago,management announced a companywide restructuring and the adoption of total quality management.Since that time,each of the divisions has been allowed to chart its own path toward TQM.Stover is new to the company and has asked to see summary figures of the costs of quality for each of the divisions.The following data were presented to her for the past six months:
Total quality costs as a percentage of sales for Adams County are

A) 2.91 percent.
B) 3.56 percent.
C) 6.47 percent.
D) 9.63 percent.

Question 43

Lipps Company manufactures custom-designed medical equipment for paramedic units.In May 2010,the company incurred the following costs of quality: $$\begin{array} { | l r |} \hline \text { Product design costs } & \$ 8,600 \\\text { Product recall costs } & 5,200 \\\text { Product simulation costs } & 13,500 \\\text { Product testing costs } & 3,500 \\\text { Product warranty claims } & 2,000 \\\text { Scrap and rework costs } & 3,000 \\\hline\end{array}$$
Total quality costs of conformance for May were

A) $27,600.
B) $11,600.
C) $25,600.
D) $22,100.

Question 44

Erin Stover has been appointed chief accountant for Dancer Industries.The company has three divisions that manufacture floor tiles.The industry is very competitive,and Dancer Industries has lost market share in each of the last four years.Three years ago,management announced a companywide restructuring and the adoption of total quality management.Since that time,each of the divisions has been allowed to chart its own path toward TQM.Stover is new to the company and has asked to see summary figures of the costs of quality for each of the divisions.The following data were presented to her for the past six months:
Nonconformance costs for Armstrong County Division are

A) $77,020.
B) $106,340.
C) $52,900.
D) $75,000.

Question 45

Some companies have moved to JIT without changing the substance of their accounting systems.Relying on the former accounting system may present problems for management because

A) traditional accounting systems are designed to track items (labor efficiency, purchase price, overhead absorption) that are no longer primary concerns of management.
B) control of cost drivers will be lost.
C) managers do not understand the new manufacturing environment.
D) traditional accounting systems discourage the creation of large inventories that are necessary to ensure uninterrupted production runs.

Question 46

Lipps Company manufactures custom-designed medical equipment for paramedic units.In May 2010,the company incurred the following costs of quality: $$\begin{array} { | l r |} \hline \text { Product design costs } & \$ 8,600 \\ \text { Product recall costs } & 5,200 \\\text { Product simulation costs } & 13,500 \\\text { Product testing costs } & 3,500 \\\text { Product warranty claims } & 2,000 \\\text { Scrap and rework costs } & 3,000 \\\hline\end{array}$$
Total quality costs of nonconformance for May were

A) $24,200.
B) $13,700.
C) $10,200.
D) $8,200.

Question 47

Erin Stover has been appointed chief accountant for Dancer Industries.The company has three divisions that manufacture floor tiles.The industry is very competitive,and Dancer Industries has lost market share in each of the last four years.Three years ago,management announced a companywide restructuring and the adoption of total quality management.Since that time,each of the divisions has been allowed to chart its own path toward TQM.Stover is new to the company and has asked to see summary figures of the costs of quality for each of the divisions.The following data were presented to her for the past six months:
Conformance costs for Adams County Division are

A) $84,210.
B) $87,220.
C) $94,350.
D) $77,080.

Question 48

CAD is

A) a cost allocating decision.
B) computer aided downtime.
C) a computer-based engineering system.
D) an organizational environment.

Question 49

Erin Stover has been appointed chief accountant for Dancer Industries.The company has three divisions that manufacture floor tiles.The industry is very competitive,and Dancer Industries has lost market share in each of the last four years.Three years ago,management announced a companywide restructuring and the adoption of total quality management.Since that time,each of the divisions has been allowed to chart its own path toward TQM.Stover is new to the company and has asked to see summary figures of the costs of quality for each of the divisions.The following data were presented to her for the past six months:
Conformance costs as a percentage of sales for Armstrong County are

A) 4.66 percent.
B) 4.97 percent.
C) 6.43 percent.
D) 3.20 percent.

Question 50

Erin Stover has been appointed chief accountant for Dancer Industries.The company has three divisions that manufacture floor tiles.The industry is very competitive,and Dancer Industries has lost market share in each of the last four years.Three years ago,management announced a companywide restructuring and the adoption of total quality management.Since that time,each of the divisions has been allowed to chart its own path toward TQM.Stover is new to the company and has asked to see summary figures of the costs of quality for each of the divisions.The following data were presented to her for the past six months:
Conformance costs for Butler County Division are

A) $100,910.
B) $89,790.
C) $71,020.
D) $59,900.

Question 51

Erin Stover has been appointed chief accountant for Dancer Industries.The company has three divisions that manufacture floor tiles.The industry is very competitive,and Dancer Industries has lost market share in each of the last four years.Three years ago,management announced a companywide restructuring and the adoption of total quality management.Since that time,each of the divisions has been allowed to chart its own path toward TQM.Stover is new to the company and has asked to see summary figures of the costs of quality for each of the divisions.The following data were presented to her for the past six months:
Conformance costs as a percentage of sales for the total company are

A) 3.91 percent.
B) 7.62 percent.
C) 3.85 percent.
D) 3.77 percent.

Question 52

Erin Stover has been appointed chief accountant for Dancer Industries.The company has three divisions that manufacture floor tiles.The industry is very competitive,and Dancer Industries has lost market share in each of the last four years.Three years ago,management announced a companywide restructuring and the adoption of total quality management.Since that time,each of the divisions has been allowed to chart its own path toward TQM.Stover is new to the company and has asked to see summary figures of the costs of quality for each of the divisions.The following data were presented to her for the past six months:
Total quality costs as a percentage of sales for the total company are

A) 3.77 percent.
B) 13.13 percent.
C) 3.85 percent.
D) 7.62 percent.

Question 53

United Insurance Agency incurred the following activity costs related to service quality. $\begin{array}{ll}\text {Total sales}& \$ 1,000,000 \\\text {Costs of quality:}\\\text { Prevention } & 50,000 \\\text { Appraisal } & 47,000 \\\text { Internal failure } & 36,000 \\\text { External failure } & 64,000\end{array}$
Costs of conformance total

A) $15,500.
B) $55,000.
C) $120,000.
D) $131,400.

Question 54

Woodruff Company manufactures custom-designed medical equipment for paramedic units.In June 2010,the company incurred the following costs of quality: $$\begin{array} { | l r| } \hline\text { Product design costs } & 12,800 \\ \text { Product recall costs } & 6,700 \\\text { Product simulation costs } & 20,500 \\\text { Product testing costs } & 8,000 \\\text { Product warranty clains } & 3,000 \\\text { Scrap and rewark costs } & 5,000 \\\hline\end{array}$$
Total quality costs of conformance for June were

A) $41,300.
B) $32,800.
C) $40,300.
D) $43,800.

Question 55

When a firm changes to a JIT operating and management philosophy,

A) it attempts to increase the number of suppliers it has for each item it uses to ensure a reliable flow of materials into the production process.
B) it seeks out the lowest-cost bidder for supplies in order to minimize costs.
C) it works more closely with fewer suppliers.
D) all of these are correct.

Question 56

Measures of customer complaints and warranty claims are used in tracking

A) materials/scrap control performance.
B) inventory performance.
C) quality performance.
D) delivery performance.

Question 57

Woodruff Company manufactures custom-designed medical equipment for paramedic units.In June 2010,the company incurred the following costs of quality: $$\begin{array} { | l r |} \hline\text { Product design costs } &\$ 12,800 \\\text { Product recall costs } & 6,700 \\\text { Product simulation costs } & 20,500 \\\text { Product testing costs } & 8,000 \\\text { Product warranty clains } & 3,000 \\\text { Scrap and rewark costs } & 5,000 \\\hline\end{array}$$
Total quality costs of nonconformance for June were

A) $11,700.
B) $14,700.
C) $22,700.
D) $15,700.

Question 58

Erin Stover has been appointed chief accountant for Dancer Industries.The company has three divisions that manufacture floor tiles.The industry is very competitive,and Dancer Industries has lost market share in each of the last four years.Three years ago,management announced a companywide restructuring and the adoption of total quality management.Since that time,each of the divisions has been allowed to chart its own path toward TQM.Stover is new to the company and has asked to see summary figures of the costs of quality for each of the divisions.The following data were presented to her for the past six months:
Nonconformance costs as a percentage of sales for Butler County are

A) 2.79 percent.
B) 3.44 percent.
C) 4.04 percent.
D) 4.69 percent.

Question 59

With respect to product quality,

A) quality must be "traded off" against cost considerations.
B) the best quality control systems rely on inspection points to ensure product quality.
C) accountants do not need to be concerned with quality control reporting, as it is entirely nonfinancial in nature.
D) quality output starts with correct product design.

Question 60

Erin Stover has been appointed chief accountant for Dancer Industries.The company has three divisions that manufacture floor tiles.The industry is very competitive,and Dancer Industries has lost market share in each of the last four years.Three years ago,management announced a companywide restructuring and the adoption of total quality management.Since that time,each of the divisions has been allowed to chart its own path toward TQM.Stover is new to the company and has asked to see summary figures of the costs of quality for each of the divisions.The following data were presented to her for the past six months:
Nonconformance costs for the total company are

A) $239,470.
B) $243,320.
C) $252,010.
D) $248,160.

Question 61

Which of these is not a category considered for evaluation when awarding the Malcolm Baldrige Quality Award?

A) Business results
B) Leadership
C) Net operating income
D) Human resource focus

Question 62

The following statement appears in the annual report of Ryan,Inc.,for the year ended January 1,2008: "We are confident that our ever-increasing emphasis on customer service will enhance our reputation as the finest retailer in our industry." Identify two nonfinancial measures of good quality and two nonfinancial measures of poor quality Ryan,Inc.,might apply.

Question 63

Which of the following specific measures of vendor quality would be used when evaluating vendors that supply a company with direct materials?

A) Defect-free material as a percentage of total materials received
B) Number of customer complaints
C) Time it takes to make a product
D) All would be considered to assess vendor quality of direct materials.

Question 64

With which of the following products would the ISO most likely deal?

A) Office chairs
B) Stereo speakers
C) Computer disks
D) Coffee mugs

Question 65

Internal reports on quality at the Acme Publishing Company generated the following information for the Trade Division for the first three months of the year: $\begin{array}{lr}\text { Total sales } & \$ 1,000,000 \\\text { Costs of quality: } & \\\text { Prevention } & 22,500 \\\text { Appraisal } & 47,000 \\\text { Internal failure } & 36,000 \\\text { External failure } & 64,000\end{array}$

Compute the costs of nonconformance as a percentage of total sales.

A) 12.0%
B) 5.4%
C) 1.3%
D) 10%

Question 66

The Mahola Company operates as three autonomous divisions.Each division has a general manager in charge of product development,production,and distribution.Management recently adopted total quality management and the divisions now track,record,and analyze their costs and nonfinancial measures of quality.All three divisions are competing in a worldwide,highly competitive marketplace.Sales and quality-related data for April are summarized below.
North Division East Division West Division
$\begin{array}{lrrr}&\text { North } & & \text { West } \\&\text { Division } & \text { East Division } & \text { Division }\\\text { Nonfinancial measures of quality: }\\\text { Defective parts per million } & 4,910 & 1,704 & 3,540 \\\text { Returned order percentage } & 7.40 \% & 2.10 \% & 4.20 \% \\\text { Customer complaints } & 50 & 16 & 30 \\\text { Number of warranty claims } & 29 & 10 & 17\end{array}$
a. Prepare an analysis of the costs of quality of the three divisions. Categorize the costs as follows: costs of conformance with subsets of prevention costs and appraisal costs, and costs of nonconformance with subsets of internal failure costs and external failure costs. Compute the total costs for each category for each division.
b. Compute the percentage of sales of each cost-of-quality total for each division. Round percentages to two places beyond the decimal point.
c. Interpret the cost-of-quality data for each division. Is each division's product of high or low quality? Why? Are the divisions headed in the right direction to be globally competitive?
d. Evaluate the nonfinancial measures of quality in terms of customer satisfaction. Explain your answer.

Question 67

XYZ Cosmetics,Inc.,has developed a set of nonfinancial measures to evaluate on-time product delivery performance for one of its best-selling cosmetics.The following data have been generated for the past four weeks: $\begin{array}{llll}& \text { Purchase } & \text { Production } & \\& \text { Order } & \text { Cycle } & \text { Delivery } \\\text { Week } & \text { Lead Time } & \text { Time } & \text { Time }\\1 & 2.4 \text { days } & 3.5 \text { days } & 4.0 \text { days } \\2 & 2.3 \text { days } & 3.4 \text { days } & 3.6 \text { days } \\3 & 2.4 \text { days } & 3.3 \text { days } & 3.4 \text { days } \\4 & 2.2 \text { days } & 3.1 \text { days } & 3.7 \text { days }\end{array}$

Compute total delivery cycle time for each week and evaluate the product delivery performance.Which area still needs management's attention?

A) Purchase order lead time
B) Production cycle time
C) Delivery time
D) None, all have improved over the past four weeks.

Question 68

Linda Klein is the chief accountant for Hogan Industries.The company has three divisions that manufacture wind velocity gauges.The industry is very competitive,and Hogan Industries has lost market share in each of the last four years.Three years ago,management announced a companywide restructuring and the adoption of total quality management.Since that time,each of the divisions has been allowed to chart its own path toward TQM.Klein is new to the company and has asked to see summary figures of the costs of quality for each of the divisions.The following data for the past six months were presented to her:
Evaluate the three divisions' programs by first computing the costs of conformance and the costs of nonconformance of each division.Also compute quality costs as a percentage of sales for each division.Identify the division that is developing the strongest quality program.Which division has been slowest to react to the management directive of TQM? Defend your answers.Round percentages to three places beyond the decimal point.

Question 69

The term given to the act of a company comparing its processes to similar processes in a successful company is called

A) process mapping.
B) TQM.
C) benchmarking.
D) return on quality.

Question 70

Discuss how the importance of product and service quality is recognized in industry today.Site examples of awards and organizations in your discussion.

Question 71

W.Edwards Deming stressed improved quality as a means of improving a company's

A) efficiency and profits.
B) product flow.
C) reputation.
D) customer base.

Question 72

Internal reports on quality at the Acme Publishing Company generated the following information for the Trade Division for the first three months of the year: $\begin{array}{lr}\text { Total sales } & \$ 1,000,000 \\\text { Costs of quality: } & \\\text { Prevention } & 44,000 \\\text { Appraisal } & 47,000 \\\text { Internal failure } & 36,000 \\\text { External failure } & 64,000\end{array}$
Compute the ratio of costs of conformance to total costs of quality.

A) 44.6%
B) 47.6%
C) 50.1%
D) 100%

Question 73

Travis Morgan is the chief accountant for Hill Industries.The company has three divisions that manufacture computer disk drives.The industry is very competitive,and Hill Industries has lost market share in each of the last four years.Three years ago,management announced a companywide restructuring and the adoption of total quality management.Since that time,each of the divisions has been allowed to chart its own path toward TQM.Travis Morgan is new to the company and has asked to see summary figures of the costs of quality for each of the divisions.The following data for the past six months were presented to him:

Evaluate the three divisions' programs by first computing the costs of conformance and the costs of nonconformance of each division.Also compute quality costs as a percentage of sales for each division.Identify the division that is developing the strongest quality program.Which division has been slowest to react to the management directive of TQM? Defend your answers.Round percentages to three places beyond the decimal point.

Question 74

The award given to companies that achieve distinctive results in implementing total quality control is the

A) ISO.
B) Malcolm Baldrige Quality Award.
C) Deming Application Prize.
D) Kaizen Prize.

Question 75

XYZ Cosmetics,Inc.,has developed a set of nonfinancial measures to evaluate on-time product delivery performance for one of its best-selling cosmetics.The following data have been generated for the past four weeks: $\begin{array}{llll}& \text { Purchase } & \text { Production } & \\\text { Week } & \text { Order } & \text { Cycle } & \text { Delivery } \\& \text { Lead Time } & \text { Time } & \text { Time }\\1 & 2.4 \text { days } & 3.5 \text { days } & 4.0 \text { days } \\2 & 2.0 \text { days } & 3.1 \text { days } & 3.6 \text { days } \\3 & 2.4 \text { days } & 3.3 \text { days } & 3.4 \text { days } \\4 & 2.5 \text { days } & 3.2 \text { days } & 3.3 \text { days }\end{array}$
Compute total delivery cycle time for Week 2.

A) 3.0 days
B) 6.4 days
C) 8.7 days
D) 7.0 days

Question 76

Identify and describe three traits that differentiate management information systems (MIS)from traditional management accounting techniques.

Question 77

Which company improved by using the Six Sigma quality standard?

A) Disney
B) Lucent Technologies
C) Motorola
D) Amazon.com

Question 78

Internal reports on quality at the Acme Publishing Company generated the following information for the Trade Division for the first three months of the year: $\begin{array}{lr}\text { Total sales } & \$ 1,000,000 \\\text { Costs of quality: } & \\\text { Prevention } & 50,000 \\\text { Appraisal } & 47,000 \\\text { Internal failure } & 36,000 \\\text { External failure } & 64,000\end{array}$
Compute the ratio of costs of nonconformance to total costs of quality.

A) 39.4%
B) 50.8%
C) 60.5%
D) 100%

Question 79

All-aboard Travel Agency incurred the following activity costs related to the quality of service.Identify those costs that are costs of conformance (CC)and those costs that are costs of nonconformance (CN).
_____
a. Reservation processing improvements
_____
b. Customer complaint processing
_____
c. Personnel training
_____
d. Computer downtime
_____
e. Proofreading tickets and confirmations