Deck 14: Quality and Environmental Cost Management

Question 1

Improving quality is an important competitive issue for

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

Answer 1

D

Question 2

Downtime attributed to quality problems is a(n)

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

Answer 2

B

Question 3

Lower sales due to poor product performance is an example of

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

Answer 3

A

Question 4

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 these.

Question 5

In-process inspection is a(n)

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

Question 6

Quality training programs are classified as

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

Question 7

_______________ is a predetermined amount of defective product that a company permits to be sold.

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

Question 8

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 these

Question 9

Product inspection is a(n)

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

Question 10

Quality experts maintain that total quality costs should NOT exceed

A) 2 to 4 percent of sales.
B) 2 to 4 percent of total costs.
C) 2 to 4 percent of profit.
D) profit.

Question 11

Which of the following is NOT a dimension of quality?

A) performance
B) durability
C) reliability
D) All of these are dimensions of quality.

Question 12

In quality analysis, robustness means the products

A) do not vary from the target value.
B) do have a great deal of variation from the target value.
C) do not have high customer satisfaction.
D) do have high customer satisfaction.

Question 13

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 14

_______________ are costs incurred because poor quality may or does exist.

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

Question 15

A defective product is one that does NOT

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

Question 16

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

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

Question 17

_______________ is a measure of how well a product meets its requirements or specifications.

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

Question 18

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 19

An example of a prevention cost is

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

Question 20

Inspection labor costs are classified as

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

Question 21

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 $500,000.Then the total external failure costs are estimated to be

A) $166,667.
B) $55,556.
C) $1,500,000.
D) $4,500,000.

Question 22

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 23

The costs of a consumer complaint department are

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

Question 24

Figure 14-2 At the beginning of the year, Andrew 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, internal failure costs are what percentage of sales?

A) 4.25%
B) 3.25%
C) 2.00%
D) 1.25%

Question 25

Figure 14-1 A 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 $10.A sample of five units produced showed the following values:


- Refer to Figure 14-1.What is the cost of hidden loss for production of 50,000 units?

A) $34,722
B) $90,000
C) $72,000
D) $500,000

Question 26

Figure 14-2 At the beginning of the year, Andrew 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?

A) 3.333%
B) 0.833%
C) 0.500%
D) 0.333%

Question 27

_______________ assumes that variation from target values of a quality characteristic causes hidden quality costs.

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

Question 28

In a quality cost report, quality costs are grouped into categories and then each category of quality costs is expressed as a percentage of

A) total quality costs.
B) total costs.
C) total sales.
D) total defective units.

Question 29

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.

Question 30

Figure 14-2 At the beginning of the year, Andrew 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?

A) 9.00%
B) 8.25%
C) 7.00%
D) 2.00%

Question 31

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 32

Product recalls are

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

Question 33

Figure 14-2 At the beginning of the year, Andrew 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, external failure costs are what percentage of sales?

A) 1.5350%
B) 1.1875%
C) 1.0000%
D) 0.8350%

Question 34

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 35

Warranty work is a(n)

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

Question 36

Figure 14-1 A 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 $10.A sample of five units produced showed the following values:


-Refer to Figure 14-1.What is the average loss per unit?

A) $1.44
B) $1.80
C) $7.20
D) $10.00

Question 37

_______________ uses customer surveys and interviews by sales personnel to estimate future profit losses.

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

Question 38

Figure 14-1 A 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 $10.A sample of five units produced showed the following values:


- Refer to Figure 14-1.What is k, the constant, in the Taguchi loss function?

A) 0.25
B) 2.0
C) 2.5
D) 40

Question 39

Reinspection of reworked products is a(n)

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

Question 40

_______________ assumes that the total failure cost is some multiplier of measured failure costs.

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

Question 41

The following information pertains to Taft, Inc., for 2011:

- Quality costs are what percentage of sales?

A) 3.00%
B) 5.00%
C) 6.25%
D) 6.75%

Question 42

The following information pertains to Harrison Corp.for 2011: Quality costs are what percentage of sales?

A) 23.5%
B) 15.0%
C) 6.0%
D) 2.5%

Question 43

Figure 14-3 At the beginning of the year, Grant 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 14-3.For the current year, internal failure costs are what percentage of sales?

A) 4.00%
B) 2.90%
C) 2.50%
D) 1.50%

Question 44

Figure 14-3 At the beginning of the year, Grant 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 14-3.If quality costs had been reduced to 2.5 percent of sales in the current year, profits would have increased by

A) $255,000.
B) $174,000.
C) $91,500.
D) $37,500.

Question 45

Figure 14-3 At the beginning of the year, Grant 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 14-3.As a result of quality improvements, profits have increased by

A) $97,500.
B) $61,500.
C) $22,500.
D) $15,000.

Question 46

Figure 14-5 At the beginning of the year, Jim Jackson 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 14-5.For the current year, internal failure costs are what percentage of sales?

A) 9.30%
B) 5.00%
C) 2.50%
D) 7.50%

Question 47

Figure 14-4 At the beginning of the year, John Corporation 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 14-4.For the current year, prevention costs are what percentage of sales?

A) 1.50%
B) 0.65%
C) 0.15%
D) 0.05%

Question 48

The following information pertains to Taft, Inc., for 2011:

-If quality costs were reduced to 2.5 percent of sales, profits would increase by

A) $1,000,000.
B) $850,000.
C) $500,000.
D) $250,000.

Question 49

Figure 14-5 At the beginning of the year, Jim Jackson 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 14-5.For the current year, appraisal costs are what percentage of sales?

A) 1.55%
B) 1.80%
C) 0.25%
D) 9.30%

Question 50

Figure 14-3 At the beginning of the year, Grant 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 14-3.For the current year, prevention costs are what percentage of sales?

A) 1.50%
B) 0.65%
C) 0.15%
D) 0.05%

Question 51

Figure 14-4 At the beginning of the year, John Corporation 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 14-4.For the current year, internal failure costs are what percentage of sales?

A) 4.00%
B) 2.90%
C) 2.50%
D) 1.50%

Question 52

Figure 14-5 At the beginning of the year, Jim Jackson 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 14-5.For the current year, prevention costs are what percentage of sales?

A) 2.50%
B) 9.30%
C) 0.25%
D) 1.80%

Question 53

Figure 14-3 At the beginning of the year, Grant 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 14-3.For the current year, appraisal costs are what percentage of sales?

A) 1.40%
B) 1.00%
C) 0.14%
D) 0.40%

Question 54

The following information pertains to Kanyon, Inc., for 2011:

-If quality costs were reduced to 2.5 percent of sales, profits would increase by

A) $500,000.
B) $250,000.
C) $300,000.
D) $420,000.

Question 55

Figure 14-4 At the beginning of the year, John Corporation 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 14-4.For the current year, external failure costs are what percentage of sales?

A) 4.25%
B) 2.75%
C) 2.50%
D) 1.50%

Question 56

Figure 14-4 At the beginning of the year, John Corporation 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 14-4.For the current year, appraisal costs are what percentage of sales?

A) 1.40%
B) 1.00%
C) 0.14%
D) 0.40%

Question 57

The following information pertains to Kanyon, Inc., for 2011:

- Quality costs are what percentage of sales?

A) 23.5%
B) 15.0%
C) 6.0%
D) 2.5%

Question 58

The following information pertains to Bull Company for 2011:

-Quality costs are what percentage of sales?

A) 2.5%
B) 6.0%
C) 15.0%
D) 23.5%

Question 59

Figure 14-3 At the beginning of the year, Grant 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 14-3.For the current year, external failure costs are what percentage of sales?

A) 4.25%
B) 2.75%
C) 2.50%
D) 1.50%

Question 60

The following information pertains to Bull Company for 2011:

- If quality costs were reduced to 2.5 percent of sales, profits would increase by

A) $25,000.
B) $125,000.
C) $180,000.
D) $210,000.

Question 61

The quality report that compares the current actual quality costs with short-run budgeted quality targets is the

A) interim quality performance report.
B) one-year quality performance report.
C) multiple-period quality trend report.
D) long-range quality performance report.

Question 62

A graph that plots quality costs against time is the

A) interim quality performance report.
B) one-year quality performance report.
C) multiple-period quality trend report.
D) long-range quality performance report.

Question 63

Which of the following is NOT an example of a decision-making context when using quality cost information?

A) strategic pricing
B) flexible budget analysis
C) cost-volume-profit analysis
D) none of these

Question 64

Which of the following statements is NOT true concerning zero-defects standards?

A) Defects are caused by either lack of knowledge or lack of attention.
B) JIT is a necessary requirement of a zero-defect approach.
C) Products and services are produced to meet a targeted value.
D) Zero-defects allows a continual search for new ways to improve quality costs.

Question 65

According to the robust view, the strategy for reducing quality costs is NOT based on which assumption?

A) For every failure there is a root cause.
B) Causes are preventable.
C) Prevention costs must be balanced with the benefits.
D) Continually redirecting prevention efforts will lead to further improvements.

Question 66

In activity-based management, which quality cost would NOT be considered value-added?

A) recruiting
B) quality circles
C) supplier certification
D) inspection of materials

Question 67

Which of the following statements is true about ISO 9000?

A) ISO 9000 is a standard of quality measurement.
B) ISO 9000 has not been adopted in Europe.
C) ISO 9000 certifies the quality of the product.
D) ISO 9000 certifies the firm's commitment to continuous improvement.

Question 68

The total quality approach

A) sets a robust zero-defect standard.
B) allows a certain number of defective products.
C) provides no encouragement for continuous improvement.
D) sets a currently attainable standard.

Question 69

Managers need quality cost information for which decisions?

A) strategic pricing
B) cost volume profit analysis
C) cost benefit of quality improvement programs
D) all of these

Question 70

Quality cost performance reports have two essential elements.

A) Kaizen standards and Taguchi quality loss function
B) Taguchi quality loss function and AQL
C) actual and expected outcomes
D) Kaizen standards and AQL

Question 71

In activity-based management, which quality cost would NOT be considered value-added?

A) internal failure
B) appraisal
C) external failure
D) none of these

Question 72

According to the robust quality view,

A) control costs increase without limits.
B) control costs increase as the robust state approaches.
C) failure costs can be driven to zero.
D) all of these.

Question 73

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

A) warranties
B) rework
C) supplier certification
D) inspection of materials

Question 74

The robust quality model

A) maintains an acceptable quality level.
B) decreases total quality costs by decreasing the number of defective units.
C) balances control costs with failure costs.
D) relies on warranty work.

Question 75

Figure 14-5 At the beginning of the year, Jim Jackson 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 14-5.For the current year, external failure costs are what percentage of sales?

A) 9.30%
B) 5.00%
C) 2.50%
D) 7.50%

Question 76

Figure 14-5 At the beginning of the year, Jim Jackson 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 14-5.As a result of quality improvements, profits have increased by

A) $400,000.
B) $58,000.
C) $186,000.
D) $244,000.

Question 77

A goal based on short-run quality goals is the

A) interim quality performance report.
B) one-year quality performance report.
C) multiple-period quality trend report.
D) interim quality standard.

Question 78

As preventive and appraisal costs increase, internal and external failure costs are expected to

A) decrease.
B) increase.
C) remain the same.
D) vary with no relation to preventive and appraisal costs.

Question 79

A quality report that compares current actual quality costs with budgeted quality costs for the future is the

A) interim quality performance report.
B) one-year quality performance report.
C) multiple-period quality trend report.
D) long-range quality performance report.

Question 80

Which of the following is a monetary incentive?

A) award to recognize an employee for their efforts
B) error cause identification program
C) public recognition for outstanding achievement
D) gainsharing